Books of Accounts

The Income Tax Act specifies the books of accounts that must be kept for the purpose of income taxation. These are outlined in Section 44AA and Rule 6F.

Who is required to maintain books of account?

Books of accounts/accounting records must be kept if the gross earnings for an established profession exceed Rs. 1,50,000 in the three prior years. This also applies to a newly established profession with gross earnings projected to exceed Rs. 1,50,000.

Rule 6F specifies the accounting records that must be preserved. The following professions must keep books of accounts/accounting records:

  • Legal
  • Medical
  • Engineering
  • Architectural
  • Accountancy
  • Technical consultancy
  • Interior decoration
  • Authorized representative — A person who represents another person for a fee before a tribunal or any authority constituted under any law. It does not include an employee of the person so represented or a person who is carrying on the profession of accountancy.
  • Film artist — This includes a producer, editor, actor, director, music director, art director, dance director, cameraman, singer, lyricist, story writer, screenplay or dialogue writer and costume designers.
  • Company secretary
  • If you are a freelancer pursuing any of these listed professions and your gross receipts are more than Rs. 1,50,000, these rules shall apply to you.
  • If the gross receipts of the Professions listed above are not more than Rs 1,50,000 in any one or more of the preceding 3 years for an existing profession or for a newly set up profession whose gross receipts are expected to be not more than Rs 1,50,000 – the professional is not required to maintain books of accounts as per section 44AA. In such a situation, a professional has to maintain books of accounts which would enable the AO to compute the taxable income of the professional from them.

Research beyond the business plan

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