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The Income Tax Act has specified the books of accounts that are required to be maintained for the purpose of Income Tax. These have been prescribed under section 44AA and Rule 6F.
Books of accounts/accounting records have to be maintained if the gross receipts are more than Rs. 1,50,000 in 3 preceding years for an existing profession. This also applies to a newly set up profession whose gross receipts are expected to be more than Rs. 1,50,000.
The accounting records to be kept have been prescribed in Rule 6F. The below professions are required to maintain Books of accounts/accounting records:
Following are the additional requirements in case of a person carrying on medical profession — physicians, surgeons, dentists, pathologists, radiologists, etc.
These books should be maintained at the Head Office or at each of the offices.
|Taxpayer||Profit/Loss||Applicable taxing section||Whether books as per section 44AA applicable|
|BusinessIncome > Rs 1,20,000||Profit||Normal provisions||Yes|
|BusinessSales, turnover, gross receipts > Rs 25 Lakh||Profit/Loss||Normal provisions||Yes|
|BusinessSales, turnover, gross receipts </= Rs 25 Lakh||Profit/Loss||Presumptive taxation – Section 44AD||No|
|BusinessSales, turnover, gross receipts </= Rs 25 Lakh||Profit/Loss||Normal Provisions||No|
|BusinessTurnover </= 2 Crore||Profit||Presumptive taxation – Section 44AD||No|
|BusinessTurnover </= 2 Crore||Loss||Presumptive taxation – Section 44AD||No|
|BusinessTurnover </= 2 Crore||Profit/Loss||Normal provisions||Yes|
|ProfessionGross receipts </= 50 Lakh||Profit/Loss||Presumptive taxation – Section 44ADA||No|
|ProfessionGross receipts </= 50 Lakh||Profit/Loss||Normal provisions||Yes|
For how long should these books be maintained?
Each year’s books must be kept for a period of 6 years from the end of that year.
Failure to maintain books of accounts: If you fail to maintain books of accounts as prescribed, you may be charged a penalty of Rs 25,000 or in some cases where you may have international transactions and you have failed to maintain information and documents for such transactions – 2% of the value of each international transaction.It would be diligent to maintain your books of accounts and keep track of all your expense and income in a methodical way.
Audit of accounts is compulsory by a Chartered Accountant for the following persons
|Tax Payer||Compulsory Audit required when|
|A person carrying on Business||If total sales, turnover or gross receipts are more than Rs. 1 crore|
|A person carrying on Profession||If gross receipts are more than Rs. 50 lakh|
|A person covered under presumptive income scheme section 44AD||If income of the business is lower than the presumptive income calculated as per Section 44AD and the person’s total income is more than the maximum income which is exempt from tax.|
|A person covered under presumptive income scheme section 44AE||If income of the business is lower than the presumptive income calculated as per Section 44AE.|
|A person covered under presumptive income scheme section 44ADA||If income of the profession is lower than the presumptive income calculated as per section 44ADA and the person’s total income is more then the maximum income which is exempt from tax.|
|Taxpayer||Audit Form||Statement Form||Due date for Audit||Due date for submission of report|
|A person carrying on business or profession who is compulsorily required to get audited under any other statute/law.||Form 3CA||Form 3CD||September 30 of the assessment year||September 30 of the assessment year|
|A person other than those listed above who are required to get audited under Income tax law||Form 3CB||Form 3CD||September 30 of the assessment year||September 30 of the assessment year|
The deadline for audit and submitssion of report is November 30 in case of international or specified domestic transactions.
If the taxpayer fails to maintain accounting records as per the requirements of Section 44AA, a penalty may be levied under section 271A. The maximum penalty that can be charged is Rs. 25,000. However, if the taxpayer can prove there is a reasonable cause for failure to maintain accounting records – such penalty may not be levied.
If the taxpayer fails to get the accounting records audited or furnish audit report as per the requirements of Section 44AB, a penalty may be levied under section 271B. The minimum penalty that can be charged is 0.5% of the total sales, turnover or gross receipts. The maximum penalty is Rs 1,50,000. However, if the taxpayer has a reasonable cause for failure to get an audit done – such penalty may not be levied.