Compulsory maintenance of books of accounts under income tax act

Salary, bonus,commission or remuneration to partners is allowed as tax deduction up to a maximum permissible limit calculated based on the book profit as arrived by the firm based on the conditions to section 40b of income tax act,1961. Section 209 of the companies act talks about maintaining books of accounts and penalties for non compliance therein. Maintaining books of accounts by small business owners. Other professions and businessif turnover 10,00,000orpgbp income 1,20,000or bothin any of last 3 yearsin case. Section 44aa has made it compulsory for certain specified professionals to maintain books of account and other documents for income tax purpose. Tax on presumptive basis in case of certain eligible businesses or professions to give relief to small taxpayers from the tedious job of maintenance of books of account and from getting the accounts audited, the incometax act has framed the presumptive taxation scheme under sections 44ad, section 44ada and section 44ae.

When a partner has to pay tax for income from partnership. For companies,accounts audited under companies act called statutory audit, hence tax audit under section 44ab not required to be conducted separately. For preparation of annual accounts the maintenance of proper books of account is a must. Section 44aa contains provisions relating to maintenance of books of accounts by persons engaged in the business or profession. In relation to any other persons engaged in any other profession or carrying on any business other than section 44aa 1, the requirement of compulsory maintenance of books of accounts applies if either the income from business or profession exceeds rs 120000 or the turnover or gross receipts exceed rs 10 lakhs in any one of the three years immediately preceding the previous year. Section 44aa prescribes the persons who are mandatorily required to maintain books of accounts for income tax purposes. Section 44ab audit is called tax audit accounts already audited 1 if accounts are audited under any other law then section 44ab audit not required but audit report in specified form to be submitted.

Period of preservation of accountsrecords under different. Compulsory accounts and records maintenance by doctors for saving tax. For this purpose would mean legal, medical, engineering, architectural. As per section 44aa, any person carrying on any of the following professions is required to maintain books of accounts. Compulsory accounts and records maintenance by doctors for. Section 44aa of income tax act and rule 6f of income tax rules deal with the provisions regarding maintenance of books of accounts under income tax act.

Maintenance of accounts under income tax act fe newsline chandigarh, wednesday, august 21, 2002 to gain a better understanding of the maintenance of accounts under the income tax act, it would be worth the while to go over certain terms, such as. Books of accounts are a prime source of information through which information can be extracted about a company. Cbdt instruction on section 44aa of the income tax act. The article covers the mandatory compliances to be followed by an llp under registrar of companies, ministry of corporate affairs, mentioned under llp act, 2008 and income tax act, 1961 including tax audit provisions. Today i was filing one itr for a client and i realised that it is absolutely wrong to say that books of accounts are not required to be maintained if presumptive provisions are adopted specially in case of professionals consultants who are ado. When maintenance of books of accounts becomes compulsory section 44aa compulsory audit of books of accounts by chartered accountant section 44ab computation of income on estimated basis under sections 44ad, 44ada and 44ae. Under the incometax law, it is mandatory on the part of a medical practitioner to maintain accounts.

Tax audit is an audit made compulsory by the income tax act, if the turnovergross receipts of the assessee reaches th. Companies act, 1956 books of accounts and vouchers of a company required to maintain for a period of 8 years immediately preceding the current year. Maintenance of books of accounts in companies act, 1956. Compulsory maintenece of books of accounts under it act.

Compulsory maintenece of books of accounts under income tax act it is generally seen that there is confusion among taxpayers about maintenance of books of accounts under income tax act like who is required compulsorly to maintain the books of accounts and for how many years one has to keep his books of accounts. Because epf inspector comes to our office and given a notice to show all accounts records like cash book, ledger, voucher etc since date of last inspection. Income tax act 1961, the books of accounts are required to be maintained if the total income exceeds rs. Section 44aa persons required to maintain books of accounts. For doctors and other specified professionals, section 44aa of the income tax act, 1961 require compulsory maintenance of books of accounts. Maintenance of accounts by certain persons carrying on profession or business 44aa 1 every person carrying on the legal, medical, engineering, accountancy or interior decoration or any other profession as notified by central board of direct taxes cbdt are required to maintain such books of.

The accounting policies mentioned in icdsi shall be applicable for computing income under the heads. Compulsory audit of books of accounts by chartered. Compulsory maintenance of books of account under income. Section 44aa compulsory maintenance of books compulsory. Such books of accounts and other documents may enable theassessing officer to compute his total income in accordance withthe provision of incometax act, 1961 us. It is generally seen that there is confusion among taxpayers about maintenance of books of accounts under income tax act like who is required compulsorly to maintain the books of accounts and for how many years one has to keep his books of accounts. If the saleturnovergross receipts from the business or profession is more than rs. As per section 44aa1 read with rule 6f the persons carrying on any of the profession as mentioned below are required to maintain books of. In the case of a taxpayer whose turnover was less than rs 25 lakh, but having total income above the maximum amount not chargeable to tax, are excluded from maintenance of books of accounts as per 44aa. In case of specified profession 2 if gross receipts exceed rs. What is the difference between tax audit and statutory. Income tax rules deal with the provisions regarding maintenance of books of accounts under income tax act. Books of accounts and audit requirements free income tax.

There is general opinion that if an eligible assessee is opting for section 44ad and section 44ada, he is not required to maintain books of accounts. How long we should keep company accounts records for epf inspection. Clarifications issued by cbdt on icds notified under the. Maintenance of accounts by certain persons carrying on business or profession. Tax, tax rates, income tax advice, tax advice, tax. Clarifications issued by cbdt on icds notified under the income tax act, 1961 march 27, 2017. Read this article to know more about section 44ab of the income tax act, 1961. Commissioner of income tax 2009 10 tmi 569 supreme court of india the supreme court held that the assessing officer cannot refer the matter to the district valuation officer under section 142a of the act without rejecting the books of accounts under section 1453 of the act.

Compulsory maintenance of books limit increased section 44aa. The impact of section 44aa and 44ab of the income tax act. The requirement to maintain books of accounts is governed by section 44aa of the income tax act. Specified professionslike accountantinterior designersfilm artistsit professionalscompany secretarydoctorca etc2. Comparison chart basis for comparison statutory audit tax audit meaning statutory audit is the audit made compulsory by the law. Businesses and professions are required to maintain the books of accounts for income tax purpose. Compulsory maintenece of books of accounts under it act it is generally seen that there is confusion among taxpayers about maintenance of books of accounts under income tax act like who is required compulsorly to maintain the books of accounts and for how many years one has to keep his books of accounts. As per income tax act, 1961 you can compute your income chargeable in accordance with either cash or mercantile system of accounting and this system should be regularly employed too.

Section 44aa compulsory maintenance of books of account under income tax act. The income tax appellate tribunal delhi in its decision 1998 97 taxmann 273magzine60t. List of income tax documentation to be maintained by. Existing financial year 2016 2017 or ay 201718it is compulsory to maintain books of accounts ifif turnover 10,00,000orpgbp income 1,20,000or bothin any of last 3 yearsin case of new business, where turnover is likely to exceed 000 or total income likely to exceed 120000 during current ye. Is it necessary to maintain books of accounts in case of. The books of accounts or documents can be impounded under section when books are produced with relation to any proceedings under income tax act or during the course of survey under section 3a for the purposes of. What books of account have been prescribed to be maintained by a person carrying on business under the income tax act. Maintenance of books of accounts under income tax act, gst. Maintaining books of accounts by small business owners, check complete requirement of maintenance of books of accounts, also check requirement to maintain books and audit, what books of accounts are required to be maintained by persons. Tax audit under section 44ab refers to the independent verification of the books of accounts of the assessee to form an opinion on the matters related to taxation compliances carried out by the assessee. How long we should keep company accounts records for epf. A company is required to maintain its books of account and vouchers for a period of 8 years immediately preceding the current year. The right to inspect books of accounts and other books and papers under this section has been provided to the directors only. Section 44aa compulsory maintenance of books of account.

Followings professions will be treated as specified profession for the purpose of section 44aa and they need to maintain their books of accounts and other documents as. This section provides that every person carrying on the legal, medical, engineering or architectural profession or accountancy or technical consultancy or interior decoration or any other profession as has been notified by the central board of direct taxes in the official gazette must statutorily maintain such books of accounts and other. Compulsory maintenance of accounts section 44aa income. Compliance calendar llp mandatory compliances an llp must. Compulsory maintenance of books of accounts under section. Compulsory maintenece of books of accounts under income. Maintenance of books of accounts by other persons covered us 44aa 2. Section 44ada is introduced by the income tax department for small and medium practitioners and professionals whose receipt is upto rs. Followings are the provisions of section 44aa of income tax act, 1961.

The period of preservation of books of accounts is different in different laws as under. Compulsory maintenance of books of account under income tax act 1961 it is generally seen that there is confusion among taxpayers about maintenance of books of accounts under income tax act like who is required compulsorly to maintain the books of accounts and for how many years one has to keep his books of accounts. Maintenance of books of accounts under section 44aa. Under the companies act, 1956 maintenance of books of accounts is mandatory for every class of companies. Period of preservation of accountsrecords under different laws. When maintenance of books of accounts becomes compulsory. Icds is not meant for maintenance of books of accounts or preparing financial statements. Section 44ab compulsory tax audit requirement compulsory. Section 44aa gives details of who all are required to maintain books of accounts for the purpose of income tax. Check if you are required to maintain books of accounts as per the income tax act 1961. Books of accounts and vouchers of a section 25 company required to maintain for a period not less than 4.

Compulsory maintenance of books of account under income tax. Maintenance of books of account is mandatory if income taxaudit report form3cd ay201920, tax audit limit 44ab 1or2 crore,presumptive tax 44ad,44ada duration. The detailed requirements of different transactions are prescribed under section 44aa. The provisions of income tax act shall also be complied with in this regard. When person is required maintain books of accounts under income tax act. In case of specified profession if gross receipts are less than 150000. Audit of accounts is compulsory by a chartered accountant for the following persons. The applicable section of income tax act are sections 44aa read with rule 6f maintenance of books of accounts and section 92d read with rule 10d for international transactions. Compulsory maintenance of books of accounts under section 44aa of income tax act. The persons carrying on these professions are statutorily obliged to maintain the prescribed books of account and other documents regardless of the quantum of. Section 128 of companies act, 20 books of account, etc.