Section 44AA of Income Tax Act - Everything You Need to Know

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:

1. Cash book: A daily record of all cash receipts, payments and cash balance.
2. Journal, in case of use of Mercantile Accounting format
3. Ledger
4. 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.
5. 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.
6. 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.

When Bookkeeping is not Required

Bookkeeping is not required under the following conditions:

• Businesses and professions under Section 44AD and Section 44AE: Businesses and professions under these sections do not have to maintain books of accounts. The exception to this is if taxpayers claim that their business income is lesser than the presumed income under the sections 44AD and 44AE. Such taxpayers must maintain their book of accounts. This will enable the Assessing Officer to calculate their accurate taxable income under the Income Tax Act. However, specific records have not been prescribed.
• If income is less than Rs.1.20 lakh or the total sales/gross receipts or turnover do not exceed Rs.10 lakh in the preceding 3 years: Businesses and professions that fall into this category do not have to maintain books of accounts.
• For newly established businesses or professions with income less than Rs.1.20 lakh/total sales/gross receipts or turnover not more than Rs.10 lakh in the preceding 3 years: Books of accounts need not be maintained for such businesses or professions.

Audit Requirements

A Chartered Accountant has to compulsorily conduct audit of accounts for the following categories of taxpayers:

Due date for Audited Records and Audit Report Submission

Penalty for not maintaining accounting records as per Section 44AA

If the accounting records are not maintained by the taxpayer as per Section 44AA's requirements, a penalty under Section 271A will be levied. The maximum chargeable penalty under this section is Rs.25,000.

However, the penalty may not be levied if the taxpayer is able to prove beyond doubt that there was a reasonable cause for not being able to maintain the required accounting records.