Section 44AA, maintaining books of accounts by person carrying on business or profession - Professionals - Taxation - TIK Share
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Section 44AA, maintaining books of accounts by person carrying on business or profession


Ankit Sharma

2015-07-05

A. This section provides that every person who is carrying on profession, notified by Central Board of Direct Tax in official Gazette, are statutorily required to maintain books of accounts and other documents that would enable Assessing Officer to compute his total income in accordance with provision of Income tax act.

The professions so far notified by Central Board of Direct Tax in Official Gazette are –

  1. Profession of Authorised representative
  2. Profession of film artiste (actor, camera man, director, music director, art director,, editor, singer, lyricist, story writer, screen play writer, dialogue writer and dress designer)
  3. Profession of Company Secretary
  4. Information technology professionals
  5. Legal Profession
  6. Medical
  7. Engineering
  8. Architectural
  9. Profession of Accountancy
  10. Technical Consultancy
  11. Interior Decoration

The persons carrying on these professions are statutorily obliged to maintain prescribed books of accounts and other documents regardless of quantum of their income.

As per rule 6F Professionals specified above are required to maintain following set of books of accounts if conditions specified under rule 6F are satisfied (Note that all the professionals specified above are required to maintain books of accounts irrespective of their income/gross receipt, but professional  who satisfy conditions specified under rule 6F are required to maintain books specified under rule 6F, and other’s will have to maintain such books of accounts which would enable Assessing Officer to compute total income as per provision of Income tax act, 1961) –

  1. a cash book;
  2. a  journal ,if accounts are  maintained on mercantile basis
  3. a ledger;;
  4. carbon copies of bills and receipts issued by the person whether machine numbered or otherwise serially numbered, in relation to sums exceeding Rs  25;
  5. 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 Rs 50, payment vouchers prepared and signed by the person:

A person carrying on medical profession shall, in addition to the books of account and other documents specified in sub-rule (2), keep and maintain the following, namely :—

  1. a daily case register in Form No. 3C;
  2. an inventory [under broad heads,] as on the first and the last day of the previous year, of the stock of drugs, medicines and other consumable accessories used for the purpose of his profession.

 

Conditions to be satisfied under rule 6F for maintaining books of accounts specified above are –

-          if gross receipts exceed Rs 1,50,000 in all the 3 years immediately preceding the previous year ; or

-          if, where the profession has been newly set up in the previous year, his gross receipts are likely to exceed Rs 1,50,000 in that year.

 

B. Every person carrying on business or profession [not being a profession specified above] shall  keep and maintain books of accounts and other documents that would enable Assessing Officer to compute his total income in accordance with provision of this act ,-

    • if his income from business or profession exceeds Rs 1,20,000 or his total sales, turnover or gross receipts, as the case may be, in business or profession exceed or exceeds Rs 10 Lakh in any one of the three years immediately preceding the previous year; or
    • where the business or profession is newly set up in any previous year, if his income from business or profession is likely to exceed Rs 1,20,000 or his total sales, turnover or gross receipts, as the case may be, in    business or profession are or is likely to exceed Rs 10 lakh, during such previous year; or
    • where the profits and gains from the business are deemed to be the profits and gains of the assessee under section 44AE or section 44BB or section 44BBB, as the case may be, and the assessee has claimed his     income to be lower than the profits or gains so deemed to be the profits and gains of his business, as the case may be, during such previous year; or
    • where the profits and gains from the business are deemed to be the profits and gains of the assessee under section 44AD and he has claimed such income to be lower than the profits and gains so deemed to be the profits and gains of his business and his income exceeds the maximum amount which is not chargeable to income-tax during such previous year,

Under Income tax act books of accounts and documents shall be kept and maintained for a minimum of 6 years from the end of the relevant assessment year. However, where the assessment in relation to any assessment year has been reopened under section 147 within the period specified in section 149, all the books of account and other documents which were kept and maintained at the time of reopening the assessment shall continue to be so kept and maintained till the assessment so reopened has been completed.

The books and documents shall be kept and maintained at the place where the person is carrying on the profession, or where there is more than one place, at the principal place of his profession. However, if he maintains separate set of books for each place of his profession, such books and documents may be kept and maintained at the respective places.

Stock Guru

2015-07-05

I am a stock trader. Do i need to maintain books of accounts?

Whether I am a professional or business owners under the income tax laws?

Reply

Ankit Sharma

2015-07-06

Under income tax laws, stock trader come under business category. 

As per section 44AB of Income tax act, you will have to maintain books of accounts if your 'turnover'exceeds 1 crore or if your 'turnover'is Rs 1 crore or less and you claim your income to be less than 8%.

Meaning of 'turnover' -

a. If you are purchasing securities for delivery, then your total turnover will be the aggregate of sale value of securities during relevant previous year.

b. If you are purchasing securities for otherwise than delivery, then 'turnover' will be the difference between purchase and sale value, as in these cases transaction will be settled net in cash i.e. difference between Sale and purchase value.

For this negative value(loss) under one transaction should not be set off against gain in other transaction. Both 'loss' and 'gain' should be added to compute total turnover.

 

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Stock Guru

2015-07-06

I did not understand last point. You mean to say that I should add both loss and profit in positive amount only to arrive at the total turnover.

Example, if my profit in other than equities is 80 Lakhs and loss is 20 Lakhs, then my turnover will be 1 crore and not 60 lakhs?

Reply

Mukesh Jain CA

2015-07-09

Dear Readers,

Don't think that we need to maintain books only for 6 years. In cases of Income Escaping assessment, Search Assessments the period will get extended till the time of conclusion of assessment.

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