[Maintenance of accounts by certain persons carrying on profession or business. The section has been inserted by taxation laws (Amendment) Act 1975 , wef 1.4.1976 ( AY 1976-77)
44AA (1) of the Income Tax Act , 1961
Every person
carrying on legal,
medical,
engineering
or architectural profession
or the profession of accountancy
or technical consultancy or
interior decoration or
any other profession as is notified by the Board in the Official Gazette
shall keep and maintain such books of account and other documents as may enable the [Assessing] Officer to compute his total income in accordance with the provisions of this Act.
Section 44AA (1) is clear that professional persons are required to keep and maintain such books which enables the Assessing Officer to compute his or her total income in accordance with the provisions of this act .
(2) Every person carrying on business or profession [not being a profession referred to in sub-section (1)] shall,—
Every person carries business or profession other than the profession referred in section 44AA(1) shall maintain the books if any one of two conditions are fulfilled .
(i) if his income from business or profession exceeds [one lakh twenty] thousand rupees or his total sales, turnover or gross receipts, as the case may be, in business or profession exceed or exceeds [ten lakh] rupees in any one of the three years immediately preceding the previous year; or
the income from business or profession exceeds one lakh twenty thousand rupees or his turnover exceeds ten lakjh rupees . Any one condition is fulfilled by the assessee then he or she shall keep and maintain such books of account and other documents as may enable the assessing officer to compute his or her total income The condition is fulfilled by the assessee in any
one of the three years ;
immediately preceeding the previous year .
If Assessment year is 2022-23
The previous year is F.Yr. 2021-22
Three years preceeding the previous year are FY 2018-19, FY 2019-20 and FY 2020-21
If during the FYs 2018-19 , 2019-20, 2020-21 if his or her income is more than One lakh twenty thousand rupees or his turnover is more than ten lakhs rupees , then assessee is required to keep and maintain such books as required above for the FYr. 2021-22
(ii) where the business or profession is newly set up in any previous year, if his income from business or profession is likely to exceed [one lakh twenty] thousand rupees or his total sales, turnover or gross receipts, as the case may be, in business or profession are or is likely to exceed [ten lakh] rupees, [during such previous year; or
In this scenario the assessee is required to keep and maintain such books or accounts if the business or profession is newly set up during the previous year .
(iii) where the profits and gains from the business are deemed to be the profits and gains of the assessee under [section 44AE] [or section 44BBor 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]]
The assessee shall keep and maintain such books of accounts which shall enable the assessing officer to compute his total income if profits are lower than the profits under section 44AE , 44BB or section 44BBB of the Act during such previous year . This is applicable when assessee is doing business .
Wef AYr. 2017-18 ( wef 1.4.2017)
(iv) 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 tax in any previous year
In this scenario he shall keep and maintain such books of accounts which shall enable the assessing officer to compute the taxable income of the assessee as per provisions of this act
In all the above four categories the assessee shall keep and maintain such books of account and other documents as may enable the [Assessing] Officer to compute his total income in accordance with the provisions of this Act.
Proviso inserted wef 1.4.2018 (AY 2018-19 )
Provided that in the case of a person being an individual or a hindu undivided family , the provisions of clause (i) and clause (ii) shall have effect, as if for the words “ one lakh twenty thousand rupees “ , the words “two lakhs fifty thousand rupees “had been substituted
Second provisio also inserted wef 1.4.2018 (AY 2018-19)
Provided that in the case of a person being an individual or a hindu undivided family , the provisions of clause (i) and clause (ii) shall have effect, as if for the words “ ten lakh rupees “ , “ the words twenty five lakh rupees “ had been substituted
(3) The Board may, having regard to the nature of the business or profession carried on by any class of persons, prescribe, by rules, the books of account and other documents (including inventories, wherever necessary) to be kept and maintained under sub-section (1) or sub-section (2), the particulars to be contained therein and the form and the manner in which and the place at which they shall be kept and maintained.
According to the nature of business or profession the Board shall prescribe by rules the books of accounts and other documents to be kept and maintained depending on the nature of business or profession .
(4) Without prejudice to the provisions of sub-section (3), the Board may prescribe, by rules, the period for which the books of account and other documents are to be kept and maintained under sub-section (1) or sub-section (2) shall be retained.]
The board may prescribe by rules the time period for which the books of accounts are to be maintained
Summary
The assessee has to show his profit @ 8% or more if his turnover is upto rupees 1 crore . If profit is shown less than 8 % then he has to keep and maintain such books of accounts which enables the assessing officer to compute his taxable income as per provisions of this act .
Get the books of accounts audited if subsection (4) of section 44AD is not followed.
You have to maintain the books if the turnover is upto twenty five lakhs and profit is more than two lakhs fifity thousand rupees
You have to maintain books of accounts if profit is upto two lakhs fifty thousand rupees and turnover is more than twenty five lakh rupees.
Show the net profit more than 8% of the gross receipts otherwise maintain the complete books and file balance sheet with the department if turnover is upto rupees one crore . if turnover is more than one crore the assessee has to follow section 44AB of the Act and 44AD of the Act for business and if professional receipts are upto fifty lakh rupees then assessee has to follow section 44ADA of the Act .
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Disclaimer
The author is not responsible for any damages if caused due to mistake or not following the provisions strictly in the proceedings with any authority or court . This is just academic in nature and purpose . Author has tried to brief and explain the confusion for audit of books among some professionals . Thanks with regards.
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