There is confusion among taxpayers about maintenance of books of accounts under Income Tax Act like for whom maintenance of the books of accounts are compulsory and what is the preservation period for keeping these books of accounts.
If the sale/turnover/gross receipts from the business or profession is more than Rs.25,00,000 or the income from business or profession is more than Rs.2,50,000 in any of the 3 preceding years, then books of accounts should be compulsorily maintained.
Books of account and other documents to be kept and maintained under section 44AA(3)(sub rule 6F) of Income tax Act by persons carrying on certain professions.
(1) Every person carrying on the following profession shall keep and maintain the books of account and other documents specified in sub-rule (2):
(i)Legal
(ii)Medical
(iii)Engineering
(iv)Architectural
(v)Accountancy
(vi)Technical Consultancy
(vi)Interior Decoration
(vii)Any other profession that may be notified by CBDT in future
(2) The books of account and other documents referred to in sub-rule (1) shall be the following, namely:—
(I) a cash book;
(ii) a journal, if the accounts are maintained according to the mercantile system of accounting;
(iii) a ledger;
(iv) carbon copies of bills, whether machine numbered or otherwise serially numbered, wherever such bills are issued by the person, and carbon copies or counterfoils of machine numbered or otherwise serially numbered receipts issued by him:
[Provided that nothing in this clause shall apply in relation to sums not exceeding twenty-five rupees.]
(v) Original bills wherever issued to the person and receipts in respect of expenditure incurred by the person or, where such bills and receipts are not issued and the expenditure incurred does not exceed fifty rupees, payment vouchers prepared and signed by the person:
[Provided that the requirements as to the preparation and signing of payment vouchers shall not apply in a case where the cash book maintained by the person contains adequate particulars in respect of the expenditure incurred by him.]
In addition to above, Persons engaged in medical profession are required to maintain daily case register in the prescribed Proforma (Form No. 3C) and inventory, as at the beginning and end of the year, of stock of drugs, medicines and other consumables accessories used for the purpose of the profession.
As per Rule 6F(5) of Income Tax Act, the books of accounts and other documents are to be kept for at least 6 years from the end of relevant assessment year. That means from the AY 2021-22, one should keep books of accounts up to the AY 2015-16.
The assessee needs to maintain the proofs of earning for every source of income for the purpose of calculating the income by the assessing officer. Even if the specified documents are not kept, there should be sufficient records that will help the officer to calculate the income.
Failure to maintain books of accounts and other documents or failure to maintain as required u/s 44AA attracts penalty of Rs. 25000 u/s 271A. The penalty can be imposed by the assessing officer or CIT (Appeal).
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