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BUSINESS OR PROFESSION & MANDATORILY KEEP AND MAINTAIN BOOKS OF ACCOUNTS....A LEGAL REQUIREMENTS ONE MUST KNOW


BUSINESS  OR  PROFESSION AND REQUIREMENTS OF BOOKS OF ACCOUNTS…..A LEGAL OBLIGATION

It is called that Accounts is the Mirror of Business……….take it a very small person, who deals with the Pasti or scrape or any person doing small business activity for his livelihood, keeps small accounts in his diary or note book in a very unorganized way…….BECAUSE AT THE END OF DAY…MONTH OR YEAR…HE WANTS TO KNOW WHAT HE HAS EARNED AND WHERE HE IS…….same way….Income Tax department has also framed some rules and regulations to keep and maintain Books of Accounts to workout the exact taxable Income for Taxation purpose. Today we will look at all those provisions which mandatorily impose responsibility for maintenance of Accounts.

THRESHHOLD LIMIT OF TURNOVER / INCOME:

IF YOU ARE AN INDIVIDUAL OR HUF……..means you are doing Business or Profession under Proprietorship and Proprietor is INDIVIDUAL OR HUF, then
You must maintain minimum books of accounts as follows:

FOR BUSINESS:   If  Turnover of the Business Exceeds Rs.25 Lakhs in any 3 previsous years or if the business is new, and if Turnover of the business is likely to exceeds the prescribed turnover                                                                                       OR
FOR PROFESSION, If  Turnover of the Profession Exceeds Rs.25 Lakhs in any 3 previous years or if the Profession is new, and if Turnover is likely to exceeds the prescribed turnover                                                                                           OR
If the Net Income of the Business  or  Profession exceeds Rs.2,50,000/- then it becomes mandatorily to keep and maintain Accounts of Business or Profession with minimum books of accounts before filing Income Tax Return.

For those business or profession, who files their Income Tax Return on Presumptive Basis…U/S 44AD, U/S 44BB, U/S 44BBB, 44AE….are exempted from keeping and maintaining proper books of accounts but to maintain those records to proves Turnover as disclosed in Income Tax Return.
For those, whose Turnover of Business or Profession does not exceeds the Prescribed limits, though not mandatory, but advisable to keep and maintain basic books of account before filing Income Tax Return which has so many benefits attached with it.

WHO INCLUDES UNDER PROFESSION:
U/S 44AA (1) Every person carrying on Legal, Medical, Engineering or Architectural profession or the Profession of Accountancy or Technical Consultancy or Interior Decoration or Any Other Profession as is notified by the Board in the Official Gazette

WHICH BOOKS OF ACCOUNTS ARE REQUIRED TO BE MAINTANED:
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 Fifty 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.]
(a)

“authorised representative” means a person who represents any other person, on payment of any fee or remuneration before any Tribunal or authority constituted or appointed by or under any law for the time being in force, but does not include an employee of the person so represented or a person carrying on legal profession or a person carrying on the profession of accountancy;
(b)

“cash book” means a record of all cash receipts and payments, kept and maintained from day-to-day and giving the cash balance in hand at the end of each day or at the end of a specified period not exceeding a [month];
(c)

“film artist” means any person engaged in his professional capacity in the production of a cinematograph film whether produced by him or by any other person, as—

(i)

an actor;
(ii)

a cameraman;
(iii)

a director, including an assistant director;
(iv)

a music director, including an assistant music director;
(v)

an art director, including an assistant art director;
(vi)

a dance director, including an assistant dance director;
(vii)

an editor;
(viii)

a singer;
(ix)

a lyricist;
(x)

a story writer;
(xi)

a screen-play writer;
(xii)

a dialogue writer; and
(xiii)

a dress designer.
*   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 :—
(i)

a daily case register in Form No. 3C;
(ii)

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.
AND  Document has been u/s 2(22AA) as including an electronic record as defined in clause (t) of sub section (1) of section 2 of the Information Technology Act, 2000
.
·         The books of account and other documents specified in sub-rule (2) and sub-rule (3) [other than those relating to a previous year which has come to an end] shall be kept and maintained by the person at the place where he is carrying on the profession or, where the profession is carried on in more places than one, at the principal place of his profession:

Provided that where the person keeps and maintains separate books of account in respect of each place where the profession is carried on, such books of account and other documents may be kept and maintained at the respective places at which the profession is carried on.

FOR HOW MANY YEARS THESE BOOKS OF ACCOUNTS ARE REQUIRED TO BE MAINTAINED?
The books of account and other documents specified in sub-rule (2) and sub-rule (3) shall be kept and maintained for a period of six years from the end of the relevant assessment year:

Further it is provided that where the assessment in relation to any assessment year has been reopened under section 147 of the Act within the period specified in section 149 of the Act, all the books of account and other documents which were kept and maintained at the time of reopening of the assessment shall continue to be so kept and maintained till the assessment so reopened has been completed.

IF THE BUSINESS OR PROFESSION IS CARRIED ON BY OTHER THAN INDIVIDUAL AND HUF, means if the business or profession is run by Partnership firm, LLP firm, PVT LTD CO., LIMITED CO. , Trust  or AOP then they are required to keep and maintain prescribed books of accounts and no threshold limit criteria will be applicable, it means, what ever may be the Turnover or Net Income, they are required to maintain Books of Accounts.

Consequences for failure to maintain books of accounts: Failure to maintain books of accounts and other documents or to retain them 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).
DISCLAIMER:
This information or attachment to this post is intended for knowledge-sharing purposes only. All efforts have been made to ensure the accuracy of the information in this article. The information contained in this article is published for the knowledge of the recipient but is not to be relied upon as authoritative or taken as legal opinion by any means. While due care has been taken in the preparation of this publication and information contained herein, but the Author of this article will not be responsible for any errors that may have crept in inadvertently and do not accept any liability whatsoever, for any direct or consequential loss howsoever arising from any use of this article.




             



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