Maintenance of accounts carrying on profession or business Section 44AA of Income Tax Act,1961

Maintenance of accounts carrying on profession or business

Section 44AA of Income Tax Act,1961

  Section 2 (12A) of income tax act define books of accounts as under:

"books or books of account" includes ledgers, day-books, cash books, account-books and other books, whether kept in the written form or as print-outs of data stored in a floppy, disc, tape or any other form of electro-magnetic data storage device.”

When books of accounts use to be kept in manual form all information was stored in the form paper books but these days books are prepared in electronically, which is called data are stored and kept or stored at floppy, disc, tap or any other form of electro-magmatic data storage devices is recognised by the Income Tax Act, 1961.

The Professional like legal, medical (include doctors and allied services professionals), engineer, architect, accountancy or technical consultant or interior decorator or any other profession notified by the Board of direct taxes has to maintaining books of accounts and relevant documents like purchase, sales, expenses voucher/ invoices and bank transactions records in support of the income as income tax return filed by them and the assessing officer may be enable to compute and assess income as per income Tax act. The obligation to maintain books account’s threshold limit are as under:

If the income from business or profession exceeds Rupees two lakh twenty fifty thousand or sales/ turnover / gross receipts exceeds twenty-five lakhs during any the previous three years; or

If the business or profession is new during the previous year, income exceeds Rupees two lakh twenty fifty thousand or sales/ turnover / gross receipts exceeds twenty-five lakhs during; or

The income from business or profession is computed blow the presumptive/ deemed income Under Section 44AE (profits and gains from the business of plying, hiring or leasing goods carriages, Section 44BB computing profits and gains in connection with the business of exploration, etc., of mineral oil, 44BBB (profits and gains of foreign companies engaged in the business of civil construction, etc., in certain turnkey power projects); or

The computation of profits and gains of business is not on presumptive basis declares profit less then section 44AD (1), he has to maintain books of accounts and relevant documents under Section 44AD(4) of Income Tax Act.

The Board of Direct taxes may prescribe books of accounts, documents or register manner and place to be kept and time limit to be kept and maintained under this section, as prescribed under the Income Tax Rules.

The Income Tax Rule, RULE 6F following accounts and other documents shall be maintained:

a. Cash Book,

b. Journal(If Mercantile system of accounting adopted),

c. To be maintained and preserved Ledger, Carbon/ second copies/ counter foils of bills/invoice and receipts (retain/maintain, if it is more then Rs. 25/-)

d. To be maintained and preserved Original bills/invoice and payments of expenses incurred for an amount more then Rs. 50/-

e. Payment of voucher should be prepared and signed (need not to prepare and signed expenses voucher, if the entries of expenses adequately explained into books of accounts;

f. medical professional should maintained a daily case register in addition of books of accounts in the form Form-3C and inventory of drugs/ medicines, consumable accessories used for profession;

g. The books of account and other documents shall be kept and maintained for six years;

h. case assessment is pending under section 147 of Income Tax Act, The books of account and other documents shall be kept and maintained till assessment is complete

FORM NO. 3C

[See rule 6F(3)]

Form of daily case register

[TO BE MAINTAINED BY PRACTITIONERS OF ANY SYSTEM OF MEDICINE, I.E., PHYSICIANS, SURGEONS, DENTISTS, PATHOLOGISTS, RADIOLOGISTS, VAIDS, HAKIMS, ETC.]

1. Date
2. Sl. No.
3. Patient's Name Nature of professional services rendered, i.e., general consultation, surgery, injection, visit, etc.
4. Fees received Date of receipt

The professions, under section 44AA(1) can adopt presumptive income Tax Under section 44ADA, which is 50% of the gross receipt or turnover. The gross receipt of profession do not exceed Rs.50 lakhs.

If the Income Tax Act or Rule do not specified record of earning, assessee should maintain a reasonable record to prove his income.

Failure to keep, maintain or retain books of account, documents, etc; as required under section 44AA a Fixed amount of Rs. 25,000 is imposable under section 271A of the income Tax Act..

CIT v. Dolphin Builders (P.) Ltd. (2013) 356 ITR 420 // 90 DTR 75 //216 Taxman 116 (MP)(HC)

“S. 44AA : Accounts : When the assessee had maintained account books, vouchers and other documents as required under sub-section (2) of section 44AA and got them audited and furnished them along with the audit report such benefit should have been extended to the assessee. The audited account books were maintained and there was no question of disbelieving them in the absence of any cogent evidence.”

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