Section 44 aa of income tax act describes the account books need to be maintained for filing & track of income tax rule 6f gives details info on this
The professionals who have gross receipt of 1,50,000 in three previous consecutive years for the same profession and new professions who are expecting gross receipts of more than 1,50,000.
The professions need to maintain accounting records has described in Rule 6F are as follows
- Legal
- Medical
- Engineering
- Architectural
- Accountancy
- Technical consultancy
- Interior Decoration
- Company Artist
- Authorized representative
- Company secretary
Any freelancer who comes in any of the above professions with gross receipts exceeds 1,50,000 comes under this rule, In case the total receipts are below 1,50,000 from above profession mentioned or not, in existing profession for preceding 3 years or even 1,or a new profession where total receipt is expected less than 1,50,000, the freelancer or professional is mandatory to maintain the account books, the limit has been increased to 2,50,000 from 1,50,000 in AY 2018-2019
Account books specified in rule 6F
- Photocopies of bill receipts exceed rupees 25 issued by you
- Expenditures original bills exceed rupees 50 incurred by you
- In order to make the financial statements, A ledger is required with journal details entries flow which has all account details.
- A Journal according to the mercantile system of accounting. A log where daily transaction are kept is known as a journal, here total credits equal total debits and known as account record, by following double accounting terms like each credit has corresponding debit and vice versa
- Cash book, A detailed record of daily activities of payments and receipts which show daily cash balances or at least on month end but should not exceed than this
For a medical profession like Physician, Dentist, Surgeon, Radiologists, Pathologists etc would need to follow the below said additional requirements.
- Fees received with the date of receipt, services rendered daily cash register needs to be maintained with details of patients.
- Consumable used details, Drugs stocks details, and medicines details are required.
Where are for how long these books are required
These record books must be maintained at each office or head office and books need to be kept for 6 years from dates ends of that year.
Failure in maintaining the record books
In case you are doing international transactions and are failed to keep the record books than 2% of every single international transaction will be penalized as a penalty, and in case of domestic transactions failure in keep record books would end up as a penalty of 25000/.
It is highly advised and must to keep a book of accounts to keep track of all expenses and income in a calculative manner
When booking keeping isn’t required
- The total sales income doesn’t cross 1,20,000, in all preceding 3 years turn over and total receipts don’t cross 10,00,000,the accounts books are not required to kept or maintained, for new business or professional where expected sales won’t cross 1,20,000 and total turnover and receipts don’t cross 10,00,000 the same sort of rules will be applicable of not maintaining the books of accounts for new professions also
- In case the income or total sales exceeds then 1,20,000, In preceding 3 years the gross receipts and turn over exceeds 10,00,000 these business and accounts must maintain books of accounts and all accounts related documents which helps the assessments officer to asses and calculate the income which is taxable under income tax acts. The same rules are applicable for newly formed business where accepted income is likely to cross 1,20,000 and sales, and gross receipts or turnover is expected to cross 10,00,000
- The business and professions covered under section 44AD and 44AE doesn’t need and neither expected to required to maintain accounts books, having said that those taxpayers who claim that their business income is lower than expected income calculated comes under 44 AD & 44AE does require and must maintain books of accounts to help the assessment officer to assess the income which is taxable under income tax act.
- From AY 2018-2019 the annual limit has been increased from 1,20,000 to 2,50,000 & and from 10,00,000 to 25,00,000
Audit Requirements
For the below-said person, the audit of accounts is essentially required
- A person running a business and total turnover, gross receipts or sales cross rupees 1 crore (from financial year 2016-to the financial year 2017 its rupees 2 crores) than the compulsory audit is required
- A person running profession with more than 25 lacs of gross receipts (from financial year 2016-to the financial year 2017 its rupees 50 lacs) the audit is required
- A person covered under presumptive income scheme section 44AD & the income calculated under the presumptive income is higher than the actual income from business as per section 44 and the total income is more than minimum income which is exempted from tax than the audit is required.
- A person covered under presumptive income scheme section 44AE and the business income is lower than the presumptive income calculated on the bases of 44AE than the audit is required
Submission of the audit report and due date of getting audited records
| Taxpayer | Form required for audit | Statement Form required | The due date for the Audit | The due date for submission of the report |
| A person carrying on business or profession on whom it is compulsorily required to get audited. | Form 3ca | Form 3cd | 30th September of the assessment year | 30th September of the assessment year |
| A person other than listed above | Form 3cb | Form 3cd | 30th September of the assessment year | 30th September of the assessment year |
In the case of international or domestic specified transactions, 30th November is the date of the deadline for submission of report and audit
Section 44 AA penalties in case of accounting records required are not maintained
Although the penalty in case of not maintaining the accounting records described under section 44 AA IS 25000 levied under section 271 A, in case the taxpayer proves the reasonable answers of not maintaining the records the penalty may not be levied
Failure penalty to get the books audited as per section 44 AB
As described in section 44 AB, The taxpayer fails to get the account record audited or furnish audit reports, The penalty may be levied under section 271B. The maximum amount of penalty is rupees 1,50,000 and minimum is 05% of turnover, gross receipts or total sales, In case the taxpayer comes with a valid and reasonable cause of not getting the audit done- The penalty may not be levied.
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