Maintenance of Accounts by a Certain Person Carrying On Profession or Business

Every person carrying on legal, medical, engineering or architectural profession, or profession of accountancy or technical consultancy or interior decoration or any other profession notified by the board (CBDT) in the official gazette is compulsorily required to keep and maintain such books of account in accordance with the provisions of the Income-tax Act. Authorized representatives, film artists, company secretaries and professionals of information technology have been notified for this purpose.

The board may prescribe by rules the books of accounts be kept

As per section 44AA (3) the board may, having regard to the nature of the business carried out by the class of persons, prescribed by rules, the books of accounts and other documents to be kept and maintained, the particulars to be contained therein and the form and the manner in which the place at which they shall be kept and maintained.

Prescribed books of accounts and documents to be kept and maintained under section 44AA (3) by the person carrying on certain professions [rule 6F]: Any person carrying on legal, medical, engineering or architectural profession of accountancy or technically prescribed books of accounts and documents. The prescribed books of accounts and documents under the Rule 6F (2) are as follows:

• A cashbook
• A journal
• A ledger
• Carbon copies of bills, whether machine numbered or otherwise serially numbered whatever such bills are issued by the person and carbon copies or counterfoils of machine numbered or otherwise serially numbered receipts issued by him excepting if the bills or receipts of an amount less than INR 25
• Original bills wherever issued to the person and receipts are not issued and the expenditure incurred does not exceed INR 50payment vouchers prepared and signed by the person.

The vouchers mentioned above may not be prepared if the cashbook mentioned by the person contains adequate particulars in respect of the expenditure incurred by him.

“Cashbook” means a record of all cash receipts and payments, kept and maintained from the day to day and given to the cash balance in hand at the end of each day or at the end of the specified period not exceeding a month.

As per rule 6F(3) a person carrying in the medical profession shall, in addition to the above books of accounts and documents, keep and maintained the following also :

• A daily register in Form No. 3C
• An inventory under broadheads, as on the first and the last day of the previous year, of the stock of drugs, medicines and other consumable accessories used for the purpose of his profession.

Circumstances were maintaining the prescribed books of account shall not be necessary: maintaining the prescribed books of account shall not apply in relation to any previous year in case of any person-

• If his total gross receipts do not exceed INR 1,50,000 in any one of 3 years immediately preceding the previous year.
• 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 INR 1,50,000.

However, such a person has to maintain such books of accounts and other documents as may enable the Assessing Officer to compute his total income. Thus, a person carrying on a specified profession shall be required to maintain specified books of account:

• If his gross receipts in all the three preceding previous years exceed INR 1,50,000
• If it is a new profession set up in a previous year, it is likely to exceed INR 1,50,000 in that previous year.

The person carrying on a non-specified profession or carrying on a business [section 44AA (2)]

Every person carrying on a business or a profession shall keep and maintain books of accounts and other documents-

• If his total income from business or profession exceeds INR 2,50,000 or his total sales or gross receipts from such business or profession exceed INR 25,00,000 in any of the three years immediately preceding the relevant previous year.
• Where the business or profession is newly set up in any previous year, if, during the relevant previous year, either his total income is likely to exceed INR 2,50,000 or the total sales or gross receipts are likely to exceed INR 25,00,000.
• Where the profits and gains from the business are deemed to be the profits and gains of the assesses under section 44AE (relating to goods carriages) or section 44BB (relating to the business of exploration, etc. of minerals, oils in case of non-residents) or section 44BBB (relating to foreign companies engaged in the business of civil construction, etc. in certain turnkey projects), as the case may be, and the assessee has claimed his income to be lower than the profits or gains of his business, as the case may be, during such previous year, he shall keep and maintain books of accounts and other documents
• Where the provisions of section 44AD (4) are applicable in his case and his income exceeds the maximum amount which is not chargeable to income tax in any previous year.

CONSEQUENCES IN CASE OF FAILURE TO KEEP ACCOUNTS

SECTION 271A prescribes penalty provisions for failure to keep and maintain books of accounts, etc., and also for not retaining them for the prescribed period. The quantum of penalty impossible is fixed at INR 25,000.

Taxcellent helps you in compliance with maintaining books of accounts under the provision of the Income Tax Act, 1961. We also provide you with complete online income tax return filing services in Delhi India