Maintenance of Books of Accounts by Individuals as per Income Tax

To understand the provisions of compulsory maintenance of books of account by certain persons, one must know the meaning of the terms “specified professions” and “non-specified profession”.

Specified profession: For the purpose by a certain person, of section 44AA and rule 6F legal, medical, engineering, architectural, accountancy, technical consultancy, or interior decoration of any other notified profession [i.e., authorized representative, film artist, company secretary, and (from the assessment year 2002-03) information technology] are specified professions. For this purpose, “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.

“Film artist”, for the aforesaid purpose, 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 an actor, a cameraman, a director, a music director, an art director, a dance director, an editor, a singer, a lyricist, a story writer, a screenplay writer, a dialogue writer and a dress designer.

“Non-specified profession”: A non-specified profession is a profession other than a “specified profession” mentioned above.

Requirement of compulsory maintenance of books of account – The requirement of section 44AA and the rule for compulsory maintenance of books of account may be summarised by grouping different taxpayers into the following categories:

Category A – Persons carrying on a “specified profession” whose gross receipts in the profession do not exceed Rs. 1,50,000 in any (one or more) of the three years immediately preceding the previous year (or where the profession has been newly set up in the previous year, his gross total receipts in the profession for that year are not likely to exceed the said amount).

Persons coming under this category are required to maintain such “books of account and other documents” as may enable the Assessing Officer to compute their taxable income under the Income-tax Act. It may be noted that the Board has not prescribed books of account to be maintained for persons falling under this category.

Category B – Persons carrying on a “specified profession” whose gross receipts in the profession exceed Rs. 1,50,000 in all the three years immediately preceding the previous year (or where the profession has been newly set up in the previous year, his gross total receipts in the profession for that year are likely to exceed the said amount). Persons coming in this category are required to maintain such books of account as are prescribed by rude 6F.

Category C – Persons carrying on a “non-specified profession”. It also includes a business whose income from such business or profession does not exceed Rs.1,2000, or the total sales, turnover or gross receipts thereof are not in excess of Rs. 10,00,000, in all the three years immediately preceding the previous year (or when business or profession is newly set up, income/total sales, turnover or gross receipts are not likely the business exceed the said amount).

Persons coming under this category are not required to maintain any books of account.

Category D – Persons carrying on a “non-specified profession”. It also includes a business whose income from such business or profession exceeds Rs. 1,20,000 or the total sales, turnover, or gross receipts thereof are in excess of Rs. 1000000 in any of the three years preceding the previous years (or when the business or profession is newly set up, income/ total sales, etc., are likely to exceed the said amount).

Moreover, this category also includes the following assesses:

1. An assessee covered under section 44AD or section 44AE or section 44AF, or (With the effect from the assessment year 2004-05) section 44BB or 44BBB, if it is claimed that the profits and gains from the business are lower than the profits and gains computed in accordance with the provisions of these sections.

2. (From the assessment year 2011-12) an assessee who is covered by section 44AD and claims that the profits and gains from the business are lower than the profits and gains computed in accordance with the provisions of section 44AD(1)and his income exceeds the maximsin amount which is chargeable to tax.

3. (From the assessment year 2017-18) an assessee who is covered by section 44AD(4) his income exceeds the maximum amount which is not chargeable to income tax.

Persons falling under this category are required to maintain such “books of accounts and other documents” as may enable the Assessing Officer to compute their taxable income under the Income-tax Act. However, the Board has not prescribed the account books to be maintained by persons falling under this category.