Filing for AY 2024-25 is coming soon
Filing for AY 2024-25 is coming soon
Keep calm and sign up for early access to our super filing platform

Freelancer – Business Records or Accounting Records

Updated on: Jan 13th, 2022

|

6 min read

social iconssocial iconssocial iconssocial icons

What are the records a freelancer is required to

When you are freelancing, running a business, or maintaining your personal finances, it is always prudent to keep a record of your expenses and income. This will aid in filing your taxes. Also, maintaining account details will be good for you to know the profitability, manage expenses, and plan your next business moves. The Income Tax Act does lay down a set of guidelines where it defines specifically whether books of accounts are required to be maintained and what are those books of accounts

Type of ProfessionGross Receipts of ProfessionDuringRequired to maintain books of accountsType of books of accounts
Specified Profession*Do not Exceed Rs 1,50,000In the current year if profession has just been started OR else in any 1 or more of the 3 years immediately preceding the current year.YesNo exact books have been prescribed, but record should be such that they are enough for the Assessing Officer to compute taxable income if required.
Specified Profession*Exceed Rs 1,50,000In the current year if profession has just been started OR else In ALL the 3 years immediately preceding the current year.YesAs per Rule 6F **
Non Specified Profession{Includes those carrying on a Business} Income of such Business or non specified Profession does not exceed Rs 1,20,000 OR the total sales, turnover or gross receipts, do not exceed Rs 10,00,000In the current year if the business or profession has just been started OR else in all of the 3 years immediately preceding the current year.NoNA
Non Specified Profession{Includes those carrying on a Business} Income of such Business or non specified Profession exceeds Rs 1,20,000 OR the total sales, turnover or gross receipts, exceeds Rs 10,00,000Includes those covered under section 44AD, 44AE, 44AF, 44AB, 44BBBIn the current year if the business or profession has just been started OR else in any 1 or more of the 3 years immediately preceding the current year.YesNo exact books have been prescribed, but record should be such that they are enough for the Assessing Officer to compute taxable income if required.

From AY 18-19, the limits of Rs. 120,000 and Rs. 150,000 have been increased to Rs. 250,000 and Rs. 10,00,000 to 25,00,000.

*Specified Profession – Legal, medical, engineering, architectural, accountancy, technical consultancy, or interior decoration, or film artist(included actor, director, music director, art director, singer, story writer etc), company secretary, information technology. Also includes authorized representative – who represents any other person, on payment of any fee or remuneration, before any Tribunal or authority constituted or appointed by law (not including employee of the person represented or someone carrying on a legal profession or an accountancy profession). ** Rule 6F – The prescribed books of accounts are-

  • Cash book – record of day to day cash receipts & payments – that shows cash balance at the end of the day or at best at the end of the each month and not later
  • A journal according to mercantile system of accounting (read here to know about mercantile system https://blog.cleartax.in/freelancer-cash-basis-or-accrual-basis-of-accounting/)  – A journal is a log of all day to day transactions. It is a record, in accounting terms, where total credits equal total debits, when we follow the double entry system of accounting ie each debit has a corresponding credit and vice versa.
  • A ledger – where all entries flow from the journal, has details of all accounts, this can be used to prepare the financial statements.
  • Photocopied of bills or receipts issued by you which are more than Rs 25
  • Original bills of expenditure incurred by you which are more than Rs 50

Following are additional requirements in case of a person carrying on medical profession – physicians, surgeons, dentists, pathologists, radiologists, etc. –

  • Daily cash register with details of patients, services rendered, fees received and date of receipt
  • Details of stock of drugs, medicines, and other consumables used

These books should be maintained at the Head Office or at each of the offices. 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 & 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. Reach out to us at support@cleartax.in and know all about our services for freelancers and businesses here http://cleartax.in/Business

inline CTA
File your returns in just 3 minutes
100% pre-fill. No manual data entry
CONTENTS

Clear offers taxation & financial solutions to individuals, businesses, organizations & chartered accountants in India. Clear serves 1.5+ Million happy customers, 20000+ CAs & tax experts & 10000+ businesses across India.

Efiling Income Tax Returns(ITR) is made easy with Clear platform. Just upload your form 16, claim your deductions and get your acknowledgment number online. You can efile income tax return on your income from salary, house property, capital gains, business & profession and income from other sources. Further you can also file TDS returns, generate Form-16, use our Tax Calculator software, claim HRA, check refund status and generate rent receipts for Income Tax Filing.

CAs, experts and businesses can get GST ready with Clear GST software & certification course. Our GST Software helps CAs, tax experts & business to manage returns & invoices in an easy manner. Our Goods & Services Tax course includes tutorial videos, guides and expert assistance to help you in mastering Goods and Services Tax. Clear can also help you in getting your business registered for Goods & Services Tax Law.

Save taxes with Clear by investing in tax saving mutual funds (ELSS) online. Our experts suggest the best funds and you can get high returns by investing directly or through SIP. Download Black by ClearTax App to file returns from your mobile phone.

Cleartax is a product by Defmacro Software Pvt. Ltd.

Company PolicyTerms of use

ISO

ISO 27001

Data Center

SSL

SSL Certified Site

128-bit encryption