Section 44AA – Compulsory Maintenance of Books of Account under Income Tax Act

Section 44AA has made it compulsory for certain specified professionals to maintain books of account and other documents for income tax purpose. Followings are the provisions of section 44AA of Income tax act, 1961.

Followings professions will be treated as specified profession for the purpose of section 44AA and they need to maintain their books of accounts and other documents as specified;

  • Legal
  • Medical
  • Engineering
  • Architectural
  • Accountancy
  • Technical consultancy
  • Interior decoration
  • Authorized representative
  • Film artist
  • Company secretary
  • Information technology

Information technology has been specified from assessment year 2002-2003.

Section 44AA – Compulsory Maintenance of Books of Account under Income Tax Act

Authorized representative meaning – Section 44AA

Authorized representative for the purpose of section 44AA means a person who represents any other person on payment of any fee or remuneration, before any tribunal or authority constituted or appointed by or under any law for the time being in force, but does not include an employee of the person so represented or a person carrying on legal profession or a person carrying on the profession of accountancy. 

Film Artist – Section 44AA

Film artist has a wider meaning for the purpose of section 44AA. As per this section, film artist means a person engaged in his professional capacity in the production of a cinematography film, whether produced by him or by any other person as;

  • An actor,
  • Cameraman,
  • A director,
  • A music director,
  • An art director,
  • A dance director,
  • An editor,
  • A singer,
  • A lyricist,
  • A story writer,
  • A screen pay writer,
  • A dialogue writer and
  • A dress designer

When to maintain specified books of accounts

In the case of a specified profession

Section 44AA – Compulsory Maintenance of Books of Account under Income Tax ActAny one coming under the list of specified profession mentioned above are required to maintain books of accounts and other documents as required under section 44AA of income tax act.

If such person has gross receipt from such specified profession which does not exceed Rs. 1, 50,000 in any of the three years immediately proceeding the previous year then such person has to compulsorily maintain books of accounts and other documents which will enable the assessing officer to compute their taxable income under the income tax act.

If gross receipts out of the specified profession exceed Rs. 1, 50,000 in all the three years immediately preceding the previous year then such person is required to maintain books of accounts as are prescribed in rule 6F. Rule 6F is specific to section 44AA which will be discussed in later part of this article.

Newly set up profession under the list of specified profession

When the profession coming under the list of specified profession under section 44AA has been newly set up in the previous year and the gross total receipts in the profession for that year is not likely to exceed Rs. 1, 50,000 then such person has to maintain books of accounts and documents which will enable the assessing officer to compute their taxable income under income tax act.

Where the gross receipts in the profession for that year are likely to exceed Rs. 1, 50,000 the such person has to maintain books of accounts as are prescribed by rule 6F

Non Specified Profession for the purpose of section 44AA

Non specified professions are those professions which are out of the specified profession list mentioned above. Any person carrying on a non specified profession or business whose income from such profession or business does not exceed Rs. 1, 20,000 or the total Sales, turnover or gross receipts thereof are not in excess of Rs. 10, 00,000 in any of the 3 years immediately preceding the previous year then such persons are not required to maintain any books of account as required to to be maintained under section 44AA.

If the business or profession is newly set up and your income or turnover or total sales or gross receipts are not likely to exceed the above said amount then such business or professions are not required to maintain these books of accounts as specified for Section 44AA.

If in the above case income or turnover exceeds the limit of Rs. 1, 20,000 or Rs. 10, 00,000 then the person has to maintain books of accounts and other documents as may enable the assessing officer to compute their taxable income under income tax act.

If the profession or business is newly set up and the income or turnover is likely to exceed the limit then also you need to maintain books of accounts and other documents to enable the assessing officer to compute taxable income under income tax act.

Rule 6F – For Specified Profession

Section 44AA – Compulsory Maintenance of Books of Account under Income Tax ActCentral board of direct taxes have specified certain books of account under rule 6F which are to be maintained by the person carrying on specified profession if his turnover or sales or gross receipts from such profession exceed Rs. 1, 50,000 in any of the three years immediately preceding the previous year or a newly set up profession whose gross receipt or sales is likely to exceed Rs. 1, 50,000 during the previous year. Followings are specified books of account to be maintained for specified profession as discussed under section 44AA;

  • A cash book
  • A journal
  • A ledger
  • Carbon copies of bills
  • Original bills received for those expenditure exceeding Rs. 50
  • For expenses below Rs. 50 you need to keep all the payment vouchers with signature of recipient and accountant.

In addition to the above books of accounts a medical professional has to maintain following additional books;

  • A daily case register in form no 3C with details like the date, patient name, nature of professional services rendered, fees received and date fo receipt and
  • An inventory list with opening stock and closing stock

These are to be maintained at such places where such profession is carried on. Where such profession is carried on at more than one places then the person can maintain books of accounts at such other places.

The above books of accounts are to be maintained for a period of 6 years from the end of the relevant assessment year. If assessment for a particular year has been reopened under section 147 then all the books of accounts and documents are to be kept and maintained at the time of reopening of the assessment and should continue to be maintained till the completion of assessment.

If an assessee covered under section 44AD or section 44AE or section 44BB or section 44BBB wants to claim income lower than the specified income under those sections then such person has to maintain books of accounts as specified under section 44AA.