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Maintenance of Books of Accounts

Who is required to maintain Books of Accounts?

(Section 44AA of The Income Tax Act & Rule 6F of Income Tax Rules)

Its mandatory for certain professions to maintain books of accounts as per Income Tax Act & Rules. Certain businesses are also required to maintain books of accounts. Lets find out who is required to maintain books of accounts under Income Tax Laws.


CASE-1

People carrying on following professions are compulsorily required to Maintain Books of Accounts:
  1. Legal
  1. Medical
  1. Engineering
  1. Architectural
  1. Accountancy
  1. Technical Consultancy
  1. Interior Decoration
  1. Any other profession as notified by CBDT.
  1. Rule 6F also specifies Film Artist & Authorised Representatives along with above seven specified professions.
Such Books of accounts should be maintained that enable the Assessing Officer to compute the total income of the profession as per provisions of Income Tax Act.

Prescribed books & documents as per Rule 6F are Cash Book, Journal, Ledger & copies/originals of Bills & receipts. As per the same rule these books are required to be maintained only if gross receipts of the profession during any one of the previous three years are more then Rs. 150000. Read in detail about Rule 6F and the prescribed books & documents....


CASE-2

Maintenance of Books of Accounts on the basis of total Income

Above are the specified professions falling in the category of compulsory maintenance of books. Second category applies to all businesses & professions.

For Individuals & HUFs it is compulsory to maintain books of accounts-

If in any one of the prceeding three years
  • Income from business or profession exceeds Rs. 2,50,000 or
  • Total Sales/turnover of business or gross receipts of profession exceeds Rs. 25 lacs.
In case of newly set up business or profession if income/gross receipts/total turnover are likely to exceed the specified limit of Rs. 250000/ Rs. 25 lacs as the case may be, books of accounts should be maintained.

For all the Assessees
other than Individuals & HUFs it is compulsory to maintain books of accounts-

If in any one of the prceeding three years
  • Income from business or profession exceeds Rs. 1,20,000 or
  • Total Sales/turnover of business or gross receipts of profession exceeds Rs. 10 lacs.
In case of newly set up business or profession if income/gross receipts/total turnover are likely to exceed the specified limit of Rs. 120000/ Rs. 10 lacs as the case may be, books of accounts should be maintained.


CASE-3

For business falling under
  • Section 44AE-Business plying,hiring or leasing goods carriages,
  • Section 44BB-Business of exploration of mineral oils and
  • Section 44BBB-Foreign Companies engaged in certain specified projects,
If income to be declared is lower then as specified in the deeming section, books of accounts should be maintained.
CASE-4

For Presumptive Income Cases of Section 44AD-
  • When income of the business is to be declared at a lower rate than the prescribed limit of 8% or 6% of Section 44AD and
  • if such income is within taxable range ie. exceeds the maximum amount not chargeable to tax,
such books of accounts should be maintained that enable assessing officer to compute total income of the business.
Read in detail about Presumptive Scheme of Section 44AD
Prescribed Books of Accounts & Documents

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