Article explains Maintenance of accounts by certain persons carrying on profession, Maintenance of accounts by certain persons carrying on business, Limits for Individual & HUF for maintenance of accounts in case of business or profession, Maintenance of accounts by other person, Penalty for contravention of provisions related to Maintenance of accounts and Important Notes related to Compulsory maintenance of books of accounts under Section 44AA of Income Tax Act, 1961.

Analysis of Section 44AA of Income Tax Act, 1961 i.e. Compulsory maintenance of books of accounts

1) Maintenance of accounts by certain persons carrying on profession 

In case of specified / notified profession,

– if gross receipt is more than Rs. 1,50,000 in all 3 years preceding the previous year or

– likely to exceed if profession is newly setup

then assessee is required to maintain such book of account as may be prescribed (i.e. prescribed under Rule 6F), otherwise he is required to maintain such books of accounts or documents from which Assessing Officer is able to complete the assessment.

Income Tax Act

2) Maintenance of accounts by certain persons carrying on business

In case of persons carrying on business,

– if Profit or Gain from Business & Profession is more than Rs. 1,20,000 or

– Total Sales / Gross Receipts is more than Rs. 10,00,000

in any of the 3 years preceding the previous year or

– likely to exceeding in case of newly setup business / profession, then assessee is required to maintain any books of accounts or documents from which Assessing Officer is able to complete the assessment

– otherwise the assessee is not required to maintain any books of accounts.

3) Limits for Individual & HUF for maintenance of accounts in case of business or profession

a) In case of Business : If total Income is more than Rs. 2,50,000.

b) In case of Profession : If turnover / Gross Receipt is more than Rs. 25,00,000.

4) Maintenance of accounts by other person

a) where the profits and gains from the business are deemed to be the profits and gains of the assessee under section 44AE or section 44BB or section 44BBB as the case may be, and the assessee has claimed his income to be lower than the profits or gains so deemed to be the profits and gains of his business, as the case may be, during such  previous year; or

b) where the provisions of sub-section (4) of section 44AD are applicable in his case and his income exceeds the maximum amount which is not chargeable to income-tax in any  previous  year i.e. Where an eligible assessee declares profit for any previous year in accordance with the provisions of this section and he declares profit for any of the five assessment years relevant to the previous year succeeding such previous year not in accordance with the provisions of sub-section (1), he shall not be eligible to claim the benefit of the provisions of this section for five assessment years subsequent to the assessment year relevant to the previous year in which the profit has not been declared in accordance with the provisions of sub- section (1).

5) Penalty on contravention

As per Section 271A, if the assessee fails to maintain books of accounts as per Section 44AA then penalty of Rs. 25,000 may attract.

6) Important Notes

a) Specified Profession :

  • Medical
  • Legal
  • Medical
  • Engineering
  • Architectural
  • Accountancy
  • Technical Consultancy
  • Interior Decoration
  • Authorized Representative
  • Company Secretary
  • Film artist
  • Any other profession which may be notified by CBDT

b) Specified book as per Rule 6F :

  •  Cash Book
  • Journal
  • Ledgers

c) In case of Medical Practitioner (Profession) : Additional books of accounts i.e. daily case register & medical inventory register has to be maintained.

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