Section 44AA of the Income Tax Act specifies the books of accounts that an assessee is required to maintain for Income Tax. Section 44AA together with Rule 6F lays down the provisions concerning maintaining these books of accounts. As per this section, every person carrying on

  • Legal,
  • Medical,
  • Engineering,
  • Architectural,
  • Accountancy,
  • Technical consultancy,
  • Interior decoration,
  • Authorized representative representing another person for a fee before any tribunal or a body constituted under any law.
  • Film artist
  • Company secretary
  • Any other profession notified in the Official Gazette by the Income Tax Department

Are required to keep and maintain books of account and such accounting records to enable the Assessing Officer in computing the assessee’s total income as per the provisions of the Income Tax Act.

Further, assessees carrying on business or profession which aren’t part of the assessees above also need to keep and maintain books of accounts if:

 (i) the income from their business or profession is more than INR 1,20,000 or their turnover, total sales, or gross receipts, as the case may be, in their profession or business is more than INR 10,00,000 in any one of the 3 previous years; or

(ii) the assessee has set up a new business or profession in any previous year, and the income from such profession or business is expected to be more than INR 1,20,000 or the turnover, total sales or gross receipts, in such profession or business is expected to be more than INR 10,00,000 in such previous year; or

(iii) where the assessee’s profits and gains from his business is deemed to be profits under section 44AE/ 44BB /44BBB, and such assessee has claimed income lower than the deemed profits in such previous year; or

(iv) where the profit or gains of business for an assessee is computed as per the of section 44AD (4) and his income exceeds income is more than the maximum amount which is not chargeable to tax in any previous year.

In case of a person engaged in a business and opting for the presumptive taxation scheme of section 44AD, the provisions of section 44AA  relating to maintenance of books of account will not apply. In other words, if a person adopts the provisions of section 44AD and declares income @ 8%/6% of the turnover, then he is not required to maintain the books of account as provided under section 44AA in respect of business covered under the presumptive taxation scheme of section 44AD​.​

Rule 6F – Specified books of account

  • Cashbook
  • Journals as per the mercantile system of accounting
  • Ledgers where all the entries flow from the journal used to prepare the financial statements.
  • Photocopied of bills or receipts issued by the assessee in excess of INR 25
  • Original bills of expenditure incurred by the assessee in excess of INR 50
  • Additional requirements for individuals carrying on the medical profession
    • Daily cash register with particulars of patient details, medical services rendered, fees received, and date of such receipt
    • Particulars of stock of drugs and other consumables which are used

These book needs to be kept at the Head Office or each office of the assessee. And each year’s records should be kept for 6 years from the end of such year.

Penalty for Failure in maintaining the books of accounts

In case the assessee fails to maintain such books of accounts as laid down in the provisions of this section, the assessee might be charged a sum of INR 25,000 as a penalty and in cases where the assessee has international transactions, failure to maintain such record could attract a penalty of 2 percent of the total value of such international transaction. Further, If an assessee fails to keep the books of account according to the requirements of this section, a penalty under section 271A could be levied. The maximum penalty which could be levied is INR 25,000. However, if the assessee can prove that there’s a reasonable cause for his failure in maintaining such accounting records, the penalty might not be levied. Hence, it’s prudent to maintain the books of accounts and keeping a track of all the incomes and expenses in a systematic manner.

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One Comment

  1. Rajesh Chanana says:

    Dear Mr. Sandeep

    These provisions are not applicable for assesses whos opt for provisions under sec 44 AD and 44ADA. it should also been stated in this article

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