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

Section 44AA of income tax act 1961 requires certain persons carrying on business or profession to maintain books of accounts and other documents.

In this article, we will discuss provisions to maintain books of accounts for income tax purpose.

For certain professions, CBDT has compulsorily specified to maintain books of accounts as per rule 6F of income tax rule. Here is the list of 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.

Professionals for section 44AA can be divided into Specified 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 it can be treated as non specified profession. Please remember CBDT can from time to time edit the 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 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.

To know what kind of books of accounts and documents are to be maintained, you first have to find out 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 current financial year, exceeds Rs. 1,50,000, 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 Rs.1,50,000 (i.e. specified profession’s gross receipt does not exceed 1,50,000 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 to compute your taxable income.

If your profession is new and you have not received any receipt prior to the current financial year, then you have to find out whether your receipt will cross Rs. 1, 50,000 for the current financial year or not.

If gross receipt of the profession is likely to exceed Rs. 1, 50,000 during the current 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 to compute your taxable income.

Books of accounts for a non specified profession or business

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

For a non specified profession or business you are required to look for 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 Rs. 1, 20,000 or total sales, turnover or gross receipts are not in excess of Rs. 10, 00,000 in all the 3 years immediately preceding the 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 income or receipt are not going to 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 above specified limit in any of 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

Rule 6F 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 exceeds Rs. 1, 50,000 in all the 3 years immediately preceding the previous year.

Rule 6F will also be applicable to those who have newly set up their specified profession and 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 maintained as per 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 required to be kept and maintained till the completion of assessment.

In cases where an assessee is covered under section 44AD or 44ADA or 44AE or 44BB or 44BBB but wants to claim lower income than the specified income under these respective sections then its required to maintain books of accounts as specified under section 44AA.

Failure to keep or maintain or retain books of account, documents, etc in accordance with section 44AA will attract a penalty of Rs. 25,000.

is a fellow member of the Institute of Chartered Accountants of India. He lives in Bhubaneswar, India. He writes about personal finance, income tax, goods and services tax (GST), company law and other topics on finance. Follow him on facebook or instagram or twitter.