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Compulsory Maintenance of Books of Accounts under Section 44AA of Income Tax Act

When person is required maintain books of accounts under income tax act? This is the most common question for businessmen asks their tax advisors.

All the persons whether they are having an individual business or partnership firms or company or HUF or even they are professionals, are always required to maintain certain books of accounts in order to manage their budget and assess their total and taxable income.

As per this section all persons are required to maintain books of accounts depending on certain conditions which classify them into some categories based on their professions and businesses

  1. Specified professional persons like CA, CS, CWA, Advocates, doctors, engineers, film artist, etc. are required to maintain sufficient books of accounts so that total income of the assessee can be calculated

    Following is the condition which is required to be satisfied in order to maintain Specified books of accounts-Gross receipts in all the preceding three previous years is greater than Rs. 150000

    Notes:

  • In case of new business if in first year, gross receipt is greater than Rs. 150000 then maintain Specified books of accounts
  • Specified books of accounts- are ledger, journal, cash book, carbon copy of receipts (counterfoils), invoices, etc.
  1. Non Specified professions or all other businesses are not compulsorily required to maintain books of accounts, but only some conditions are there, which if get satisfied then they are required to maintain books of accounts

    Following are the conditions out of which if anyone get satisfied then maintain sufficient books

    1. Turnover/ gross receipts in any year out of prior 3 years is greater than 10 lakhs

      OR

      1. Net profit in any year out of prior 3 years is greater than Rs.120000

    Notes: In case of new business check the Turnover/ gross receipts of 10 lakhs/120000 of first year only because there is no prior years available

Reference: Rule 6F of the Income Tax Rules

Books of account and other documents to be kept and maintained under section 44AA(3) by persons carrying on certain professions.

6F. (1) Every person carrying on legal, medical, engineering or architectural profession or the profession of accountancy or technical consultancy or interior decoration or authorised representative or film artist shall keep and maintain the books of account and other documents specified in sub-rule (2):

Provided that nothing in this sub-rule shall apply in relation to any previous year in the case of any person if his total gross receipts in the profession do not exceed one lakh fifty thousand rupees in any one of the three years immediately preceding the previous year, or, where the profession has been newly set up in the previous year, his total gross receipts in the profession for that year are not likely to exceed the said amount.

(2) The books of account and other documents referred to in sub-rule (1) shall be the following, namely:—

   (i)   a cash book;

  (ii)   a journal, if the accounts are maintained according to the mercantile system of accounting;

(iii)   a ledger;

(iv)    carbon copies of bills, whether machine numbered or otherwise serially numbered, wherever such bills are issued by the person, and carbon copies or counterfoils of machine numbered or otherwise serially numbered receipts issued by him:

Provided that nothing in this clause shall apply in relation to sums not exceeding twenty-five rupees;

(v)   original bills wherever issued to the person and receipts in respect of expenditure incurred by the person or, where such bills and receipts are not issued and the expenditure incurred does not exceed fifty rupees, payment vouchers prepared and signed by the person:

Provided that the requirements as to the preparation and signing of payment vouchers shall not apply in a case where the cash book maintained by the person contains adequate particulars in respect of the expenditure incurred by him.]

Explanation : In this rule,—

Reference: Section 44AA of the Income Tax Act 1961: Maintenance of accounts by certain persons carrying on profession or business.

(1) Every person carrying on legal, medical, engineering or architectural profession or the profession of accountancy or technical consultancy or interior decoration or any other profession as is notified by the Board in the Official Gazette shall keep and maintain such books of account and other documents as may enable the [Assessing] Officer to compute his total income in accordance with the provisions of this Act.

(2) Every person carrying on business or profession [not being a profession referred to in sub-section (1)] shall,—

  (i)  if his income from business or profession exceeds [one lakh twenty] thousand rupees or his total sales, turnover or gross receipts, as the case may be, in business or profession exceed or exceeds [ten lakh] rupees in any one of the three years immediately preceding the previous year; or

 (ii)  where the business or profession is newly set up in any previous year, if his income from business or profession is likely to exceed [one lakh twenty] thousand rupees or his total sales, turnover or gross receipts, as the case may be, in business or profession are or is likely to exceed [ten lakh] rupees, [during such previous year; or

(iii) where the profits and gains from the business are deemed to be the profits and gains of the assessee under [section 44AE] [or section 44BB or section 44BBB], as the case may be, and the assessee has claimed his income to be lower than the profits or gains so deemed to be the profits and gains of his business, as the case may be, during such [previous year; or]]

[(iv) where the profits and gains from the business are deemed to be the profits and gains of the assessee under section 44AD and he has claimed such income to be lower than the profits and gains so deemed to be the profits and gains of his business and his income exceeds the maximum amount which is not chargeable to income-tax during such previous year,]

Keep and maintain such books of account and other documents as may enable the [Assessing] Officer to compute his total income in accordance with the provisions of this Act.

(3) The Board may, having regard to the nature of the business or profession carried on by any class of persons, prescribe, by rules, the books of account and other documents (including inventories, wherever necessary) to be kept and maintained under sub-section (1) or sub-section (2), the particulars to be contained therein and the form and the manner in which and the place at which they shall be kept and maintained.

(4) Without prejudice to the provisions of sub-section (3), the Board may prescribe, by rules, the period for which the books of account and other documents to be kept and maintained under sub-section (1) or sub-section (2) shall be retained.]



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9 thoughts on “Compulsory Maintenance of Books of Accounts under Section 44AA of Income Tax Act
  • JAGVEER SINGH says:

    sir want to knowledge about income tax rules in hindi daily

    LATEST NEWS OF INCOME TAX RULE

    yours client
    jagveer singh

  • JAGVEER SINGH says:

    sir want to knowledge about income tax rules in hindi daily

    LATEST NEWS OF INCOME TAX RULE

    yours client
    jagveer singh

    • admin says:

      JAGVEER Singh ji, Which area your more interest into Taxation on Business, Taxation of Salary, Capital Gain etc..
      You can ask your queries, we are happy to solve your tax related queries.

  • VISHAL MULCHANDANI says:

    Dear Sir,
    I want to know whether it is compulsory to issue sales invoice under the Income Tax Act, 1961 for the person who is not covered u/s 44AB.
    because in practicly in my business. it is not possible to issue.
    expecting early reply,

    • admin says:

      Vishal Ji, meaning of books of accounts means list of given under rule 6F of the Income Tax Rules

      • VISHAL MULCHANDANI says:

        I know that but it is compulsory for specified profession only.
        What about those who are non specified professionals and businessmen.
        So for non specified professionals and businessmen only need is to maintain satisfactory books of account.
        so does it necessary to issue invoice for maintenance of satisfactory books.?

        • admin says:

          As per the section if no books of accounts are specified then assessee has to Keep and maintain such books of account and other documents as may enable the [Assessing] Officer to compute his total income in accordance with the provisions of this Act.These statement is very wide in sense and gives arbitrary powers to AO and it depends on AO what he needs but in common sense it will be OK if assessee is maintaining sales and purchase register, cash book and expense register. So issue of invoice can be debatable issue at the time of assessment.

  • kapil gupta says:

    sir i want to daily news for income tax rules
    and sale tax also