Books of accounts or record maintenance required for all?

Books of accounts: Its a misconception among the people that we are a small taxpayers, we do not need to maintain proper books of accounts. Some taxpayer also thinks that showing income under section 44AD of Income Tax, we are safe. While other thinks that we are not registered under GST, we don’t need to maintain any books or records of business. Let’s clear this misconception related to maintenance of books of account or record.

Unregistered Person must Maintain Books of accounts

Though no act has specified any books for unregistered person either under Income Tax or GST, however, it is always advisable that every person must maintain the following books of accounts:

1. Sales register
2. Purchase register
3. Cash book
4. Expense register

Section 44AA: Who Should Maintain Mandatory Account Books For Income Tax?

1.Business or Profession (Other than notified) in which:

• Income exceed Rs 120,000 (For Individual and HUF limit is 250,000)– in any 1 of 3 immediately preceding years;
• Sales/Turnover/Gross Receipt exceed Rs 10 lakh (For Individual and HUF limit is 25 lakhs) – in any 1 of 3 immediately preceding years;

2.Newly Setup Business or Profession (Other than notified) in which:

• Income likely to exceed Rs 120,000 (For Individual and HUF limit is 250,000)
• Sales/Turnover/Gross Receipt likely to exceed Rs 10 lakh (For Individual and HUF limit is 25 lakhs)

3. Assessee covered under Presumptive Taxation u/s 44AE/44BB/44BBB

Assessee covered under presumptive taxation scheme and claimed his income to be lower under normal provision of income tax act than the income deemed under Presumptive Tax;

4. Assessee covered under Presumptive Taxation u/s 44AD

Any notified professional covered under presumptive taxation scheme and claimed his income to be lower under normal provision of income tax act than the income deemed under Presumptive Tax provided income exceeds the maximum amount which is not chargeable to income-tax in any previous year.

5. Notified Professionals are mandatorily required to maintain books of accounts irrespective of gross receipts or profit in any year.

Following professions are mandatorily required to maintain books of account:

• Legal
• Medical
• Engineering
• Architectural
• Interior decoration
• Accountancy
• Technical consultancy
• Film artists(anyone engaged as a professional in the film industry)
• Authorized representative
• Company secretary
• IT professional
• Any other profession as maybe by the board

Read More at: Books of Accounts -Section 44AA of Income Tax Act, 1961

Applicable books or documents shall be kept and maintained for 6 years from the end of relevant AY. If you fail to maintain books of accounts as prescribed, you may be charged a penalty of Rs 25,000 under section 271A of Income Tax Act, 1961. 

Section 44AA: Who Should Maintain Mandatory Books of Accounts For GST?

It is the responsibility of the following registered persons to maintain specified records-

• The owner
• Operator of warehouse or godown or any other place used for storage of goods
• Every transporter

Every person who is registered under GST has too compulsory maintain books of accounts from Day 1.

Read More at: Maintenance of books of Account and Records under GST law

Books of accounts under GST law should be maintained for 6 years from the last date of filing of the annual return for that year.

In case of failure in maintaining books of accounts as per section 35(1), the proper officer will determine the tax payable on unaccounted goods/ services under provisions of section 73 or section 74.

Further, as per penalty section 122(1)(xvi), failure in keeping/ maintaining the books of accounts will be liable to a penalty higher of INR 10,000 or an amount of tax involved.

Read Also: How to maintain books for proper filing of GST Returns?