Books of Accounts to be maintained for Income Tax Purpose – Section 44AA

Income tax act is very specific when it comes to maintenance of books of accounts for professionals and non professionals. In this article we will discuss provisions of income tax act 1961 related to requirement of books of accounts to be maintained by a professional for income tax purpose.

Section 44AA of income tax act 1961 specifies that every person carrying on following professions are required to maintain such books of accounts and other documents as may enable the assessing officer of income tax department to compute total income.

In certain cases, CBDT has compulsorily specified to maintain books of accounts as per rule 6F of income tax rule. Let us discuss these provisions.

Professions as specified in section 44AA;

  • Legal
  • Medial
  • Engineering
  • Architectural
  • Technical consultancy
  • Interior decoration
  • Film Artist
  • Authorized representative
  • Company Secretary
  • Information technology

These professionals are specifically required to maintain books of accounts as required in Section 44AA for income tax purpose. Section 44AA also talks about the timing of requirements to maintain books of accounts.

Profession for section 44AA has been divided into Specified professions and non Specified professions. Specified professions are those who are coming under the list that we have listed above i.e. legal or medical or engineering etc.

If your profession is not within the above list then that will be treated as non specified profession. Please remember CBDT can from time to time edit this list of specified professions.

If CBDT has included a profession in to the list then that will be treated as specified profession for the purpose of section 44AA.

Books of Accounts to be maintained for Income Tax Purpose – Section 44AA

Books of Accounts to be maintained by a Specified Profession

If your profession is in the above list then it is a specified profession and you are required to maintain books of accounts as per the provisions of section 44AA applicable to specified profession.

To know what kind of books of accounts and documents are to be maintained you first have to know your gross receipt out of the specified profession. Gross receipt means the amount that you received for the entire year from your customer without taking out expenses.

If such gross receipt out of the specified profession in all the 3 years immediately preceding the financial year in which you are now, exceeds 150000 rupees then you are required to maintain books of accounts as prescribed in Rule 6F of income tax rules.

In cases where your gross receipts for all the 3 years immediately preceding the financial year does not exceed 150000 rupees (i.e. specified profession’s gross receipt does not exceed 150000 rupees in any of the 3 years immediately preceding the financial year) then you are required to maintain books of accounts and other documents which will enable the assessing officer of income tax department to compute your taxable income.

If your profession is new and you have not received any receipt prior to that then you have to find out whether your receipt will cross 150000 rupees for the financial year or not. If gross receipt of the profession is likely to exceed 150000 rupees during the financial year in which you have started your business then you are required to maintain books of accounts as specified in rule 6F of income tax rules. Otherwise, you are required to maintain books of accounts which will enable the assessing officer of income tax department to compute your taxable income.

Books of accounts for a non specified profession

If your profession is not in the above mentioned list then it will be treated as a non specified profession. Even businesses are also coming under non specified list as it’s not related to any profession.

For non specified profession or business you are required to look into two things i.e. income and turnover of the previous years.

For a non specified profession or business, if income from such profession or business does not exceed 120000 rupees or total sales, turnover or gross receipts are not in excess of 1000000 rupees in any of the 3 years immediately preceding previous year then it’s not required to maintain any books of accounts.

Similarly, if your non specified profession is newly setup and you are expecting that income or receipt are not exceed the above specified limit then you are not required to maintain books of accounts.

If such none specified profession or business’s income or turnover exceeds the specified limit in all the 3 years immediately preceding the previous year then books of accounts and other documents are required to be maintained which should enable to assessing officer to compute taxable income.

Similarly if the non specified profession or business is newly set up and you are expecting the income or receipt to cross the limit as specified above then you are required to maintain books of accounts to enable the assessing officer to compute taxable income.

Rule 6F – Prescribed Books of accounts

You must have seen that we have referred to rule 6F while discussing the provision of maintaining books of accounts as per section 44AA.

This rule has specified list of books of accounts that are required to be maintained by the person carrying specified profession if turnover or sales or gross receipt out of the specified profession exceed 150000 rupees in any of the 3 years immediately preceding previous year.

Rule 6F will also be applicable to those who have newly set up their specified profession and their gross receipt or sales are likely to exceed 1,50,000 rupees during the financial year.

List of books of accounts as specified to be maintain in rule 6F;

  • Cash Book
  • Journal
  • Ledger
  • Carbon Copies of Bills
  • Original bills if expenditure exceeds 50 rupees
  • Payment voucher with signature of the party and accountant if expenditure is 50 rupees or below that.

Certain additional books of accounts are required to be maintained only by a medical professional person. These books are listed below;

  • Daily case register in Form No 3C with all the details
  • Inventory or Stock lists

Books of accounts are to be maintained at a place where the profession is carried out and it has to be maintained for a period of 6 years from the end of the relevant assessment year.

However, if a particular assessment year has been reopened under section 147 then all the books of accounts are to be kept and maintained till the completion of assessment.

In cases where you are covered under section 44AD or 44AE or 44BB or 44BBB but wants to claim lower income than that is specified under these sections then you are required to maintain books of accounts as specified under section 44AA of income tax act 1961.

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