Do you need to maintain books of accounts for Income Tax purpose ?

 Are you maintaining Books of accounts to disclose proper Income for Income Tax purpose?

you are filing your income tax return and declaring a certain amount as income , just think that you have received a notice from income tax department to prove your income, how will you prove that you have declared your true income? are you maintaining books of accounts and keeping record of the income and expenditure, if yes , very good but what if you are not maintaining,can Income tax department force you to maintain books of accounts or can department may penalize you for not keeping record? 

Just join me here to know what is required and what is not required , I am going to discuss the provisions relating to maintenance of books of Accounts.

There are two type requirements , one for specific persons and other is general. Specific person are those who have been prescribed to maintain books of accounts specifically and others are those who has to start maintaining books of accounts if certain conditions are satisfied.

Section 44AA of the income tax Act  deals with such provisions.

Conditions in general is as under :-

Every person carrying on any business or a profession are required to maintain such books of account and other documents, as may enable the Assessing Officer to compute his total income, in following cases

(i)  If his total income from business or profession exceeds 2,50,000 for Individual or HUF or his total sales/gross receipts from such business or profession exceeds Rs.25,00,000 for Individual or HUF in any of the three years immediately preceding the relevant previous year.

(ii) If you have started new business or profession you will be required to maintain accounts if, during the  year, either his total income is likely to exceed Rs.2,50,000 for Individual or HUF or the total sales or gross receipts are likely to exceed Rs.25,00,000 for Individual or HUF.

(iii) If he is carrying on any business covered w/s 44AE, 44BB or 44BBB and Claims his income to be Lower than the presumptive profit computed under the said sections during the previous year.

(iv) If the provisions of section 44AD(4) are applicable and his income exceeds the maximum amount not chargeable to tax in any previous-year.

Specific Person

Every person, carrying on the profession of legal, medical, accountancy, engineering, architectural profession, interior decoration, film artists, company secretaries or profession of Information Technology is compulsorily required to keep and maintain such books of account and documents as may enable the Assessing Officer to compute his total income in accordance with the provision of the Income-tax Act.

Thus following person are required compulsorily to maintain books of accounts

• Legal,
• Medical,
• Accountancy,
• Engineering,
• Architectural
• Profession,
• Interior decoration,
• Film artists,
• Company secretaries or
• Profession of Information Technology

Such specified professionals shall be required to maintain ‘Prescribed books of account’ if:

(a) his gross receipts in all the three preceding previous years exceeds 1,50,000 or

(b) it is a new profession which is set up in the previous year, it is likely to exceed 1,50,000 in that previous year.

Such prsons are required to maintain followings of the ‘Prescribed books of account’ and other documents under Rule 6F(2) are as follows:

(a) A cash book;

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

(c) A ledger

(d) Carbon copies of bills or serially numbered receipts issued; except if the bill or receipts are of an amount less than R 25; and

(e) An original bill 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 50, payment voucher prepared and signed by the person.

so if you are falling under any of the above criteria and fulfill the conditions ,it is better to start maintaining books of accounts , and comply with law otherwise a heavy penalty of Rs.25000/- may be imposed for non compliance.

Hope that it will make easy to understand the provisions and will make you able to comply with law , in case any query please write or comment in comment box. 

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