Section 44AA - Maintenance of accounts by persons carrying on business or profession - Income Tax - Ready Reckoner - Income Tax

Section 44AA : Maintenance of accounts by persons carrying on business or profession The persons who are mandatorily required to maintain books of Accounts for Income Tax purposes. As per Section 44AA , any person carrying on any of the following professions is required to maintain books of accounts:- Legal Medical Engineering Architectural Accountancy Technical Consultancy Interior Decoration Any other profession that may be notified by CBDT in future Books of Accounts to be Maintained by persons not covered above As per Section 44AA , persons carrying on the professions specified above are mandatorily required to maintain their books of accounts. However, the persons who are not covered in the list of professions specified under Section 44AA which are mentioned above are mandatorily required to maintain their books of accounts only if:- I. In case of a person (other than individual or HUF) If the Income from Business or Profession exceeds 1,20,000 or the Total Sales/ Turnover/ Gross Receipts exceeds 10,00,000 in any of the previous 3 years. If the Business or Profession is newly set-up, it would be required to maintain books of Accounts if the income from business or profession is likely to exceed 1,20,000 and the Total Sales/ Turnover/ Gross Receipts is likely to exceed 10,00,000. If the taxpayer is covered under Section 44AD / Section 44AE / Section 44AF and the taxpayer has claimed his income of the income tax return to be lower than the profits or gains deemed under Section 44AD / Section 44AE / Section 44AF respectively. II. In case of Individual or HUF [First and second proviso to section 44AA(2)] In case of Existing business or profession if income from business or profession exceeds 2,50,000/- or the Total Sales/ Turnover/ Gross Receipts exceeds 25,00,000 in any of the previous 3 years. In case of newly setup business or profession if income from business or profession exceeds 2,50,000/- or the Total Sales/ Turnover/ Gross Receipts exceeds 25,00,000 during the previous years. RULE 6F : - Books of account and other documents to be kept and maintained under section 44AA(3) by persons carrying on certain professions The category of persons specified above under Section 44AA(3) is mandatorily required to maintain the books of accounts as mentioned below. However, these books are not required to be maintained if his total gross receipts in the profession in any of the previous 3 years does not exceed 1,50,000 or in case the business is newly set-up it is not expected to exceed 1,50,000. The books of accounts to be maintained are as follows:- Cash Book Journal (if the Accounts are maintained according to the Mercantile system of Accounting) Ledger Carbon copies of the bills and receipts issued by the person in relation to sum exceeding 25. Original Bills and receipts issued to a person in respect of the expenditure incurred by the person, or where such bills and receipt are not issued, payment vouchers prepared and signed by the person, provided the amount does not exceed ₹50 where the cash book contains adequate particulars, the preparation and signing of payment voucher is not required. In case of a person carrying on medical profession A person carrying on Medical Profession shall in addition to the books of accounts and other documents specified above shall also maintain the following:- A daily case register in Form 3C Inventory Book (under Broad heads) as on the first and last day of the previous year of the stock of drugs, medicines and other consumable accessories used for the purpose of his profession. Place at which books to be kept and maintained:- The Books of Accounts and other documents shall be kept and maintained by the person at the place where he is carrying on the profession or, where the profession is carried on at more than 1 place the books should be maintained at the principal place of business. However, in case separate books of accounts are maintained in respect of each place where the profession is carried on, the books of accounts may be kept and maintained at the respective place at which the profession is carried on. Prescribed period:- All the books of Accounts specified above shall be kept and maintained for a period of 6 years from the end of the relevant assessment year. Amendment made by the Finance Act, 2022 Books or books of account include ledgers, day-books, cash books, account-books and other books whether kept in the written form or in electronic form or in digital form or as print-outs of data stored in such electronic form or in digital form or in a floppy, disc, tape, or any other form of electro-magnetic data storage device. When Book Keeping is not Required? Book keeping is not required under the following conditions: Businesses and professions under Section 44AD , 44DA , 44AE , 44BB or 44BBB : Businesses and professions under these sections do not have to maintain books of accounts. The exception to this is if taxpayers claim that their business income is lesser than the presumed income under the sections 44AD , 44DA , 44AE , 44BB or 44BBB . Such taxpayers must maintain their book of accounts. This will enable the Assessing Officer to calculate their accurate taxable income under the Income Tax Act. However, specific records have not been prescribed. If income is less than ₹ 1,20,000/- or the total sales/gross receipts or turnover do not exceed ₹ 10,00,000/- in the preceding 3 years: Businesses and professions that fall into this category do not have to maintain books of accounts. For newly established businesses or professions with income less than ₹ 1,20,000 total sales/gross receipts or turnover not more than ₹ 10,00,000/- in the preceding 3 years: Books of accounts need not be maintained for such businesses or professions. Penalty for not maintaining accounting records as per Section 44AA If a person fails to keep and maintain any such books of account and other documents as required by section 44AA in respect of any previous year or to retain such books of account and other documents for the specified period. The Assessing officer or the Joint Commissioner (appeals) or the Commissioner (appeals) may direct a penalty of ₹ 25,000 would be leviable Section 271A .