Section 44AA( Books of account)

- By  Amlan Dutta 

The Income Tax Act specifies as to who should maintain account books for the purpose of income tax scrutiny by an Assessing Officer, if and when required. As per Section 44AA and Rule 6F, persons involved in the following professions (listed as in section 44AA(1)are mandated to maintain books of account

  1. Legal
  2. Medical
  3. Engineering
  4. Architectural
  5. Interior decoration
  6. Accountancy
  7. Technical consultancy
  8. Film artists(anyone engaged as a professional in the film industry)

The Central Board of Direct Taxes is free to add professions to this list. In addition to this, the following persons also have to maintain account books:

  1. Persons involved in specified as well as non-specified professions, and in business;
  2. Anyone involved in other profession/business, who earns more than Rs. 1.2 lakh;
  3. The total turnover/gross receipts of business/profession is more than Rs. 10 lakh in any of the previous 3 years;
  4. Any individual covered under Section 44AD, 44AE or 44AF, who has declared less income than the profits estimated under these sections;
  5. Even if the business is new, if it is expected to earn more than Rs. 1.2 lakh or if its sales is expected to cross Rs. 10 lakh, then account books need to be maintained.

However, the above-listed individuals are not required to maintain account books if the business turnover in any of the previous years is less than Rs. 1.5 lakh or if the new business is not expected to cross gross receipts of Rs. 1.5 lakh.


What Accounts Need To Be Maintained Under Section 44AA?

“Maintaining account books” refers to keeping an account of all transactions undertaken by the individual or firm during an assessment year. The following books of accounts have to be maintained under Section 44AA:

  • Cash book: A daily record of all cash receipts, payments and cash balance.
  • Journal, in case of use of Mercantile Accounting format
  • Ledger
  • Carbon copies of bills and receipts, with serial numbers, issued by the assessee. This is applicable only if the amount involved in a transaction is more than Rs. 25,000.
  • Original bills and receipts for expenditure incurred by the assessee. If bills and receipts are not available, and the expenditure is below Rs. 50,000, then the person can prepare payment vouchers, or input the transaction information in the cash book.
  • Those in the medical profession also have to maintain a daily case register in Form 3C, and an Inventory Book of the stock of medicines, drugs, injections, tools and other consumables used in the profession.

All relevant account books and documents have to be kept at the place of profession, or at the main office of the profession in case there are more than 1 branches, or at each branch office of the profession. These records have to be kept for 6 years after the end of the relevant assessment year. The main purpose of maintaining these records is to ensure that you are not involved in tax fraud or evasion, and if your case comes to income tax scrutiny, the Assessing Officer could check your records of transactions