Maintenance of Book of Accounts - Section 44AA (Income Tax Act, 1961)

The provisions relating to maintenance of books of account can be classified as follows: 

1. Provisions relating to a person engaged in specified profession. (44AA(1))

2. Provisions relating to a person engaged in non-specified profession. (44AA(2))

3. Provisions relating to a person engaged in business. (44AA(2))

Section 44AA(1)

Every person carrying on :

• legal, 
• medical, 
• engineering or 
• architectural profession or 
• the profession of accountancy or 
• technical consultancy or 
• interior decoration or 
• any other profession as is notified by the Board in the Official Gazette 

shall keep and maintain such books of account and other documents as may enable the Assessing Officer to compute his total income in accordance with the provisions of this Act.

(Note: Film Artist is also a specified profession by Department)

Conclusion:-

So, in the case of specified profession there is no limit for turnover or income, if you falls under specified profession then you have to prepare your books of account.

Now, Section 44AA (2)

Every person carrying on business or profession [not being a profession referred to in sub-section (1) shall,—

(i) if his income from business or profession exceeds one lakh twenty thousand rupees or his total sales, turnover or gross receipts, as the case may be, in business or profession exceed or exceeds ten lakh rupees in any one of the three years immediately preceding the previous year; or

(ii) where the business or profession is newly set up in any previous year, if his income from business or profession is likely to exceed one lakh twenty thousand rupees or his total sales, turnover or gross receipts, as the case may be, in business or profession are or is likely to exceed ten lakh rupees, during such previous year; or

(iii) where the profits and gains from the business are deemed to be the profits and gains of the assessee under section 44AE (Special provision for computing profits and gains of business of plying, hiring or leasing goods carriages) or section 44BB(Special provision for computing profits and gains in connection with the business of exploration, etc., of mineral oils) or section 44BBB (Special provision for computing profits and gains of foreign companies engaged in the business of civil construction, etc., in certain turnkey power projects), as the case may be, and the assessee has claimed his income to be lower than the profits or gains so deemed to be the profits and gains of his business, as the case may be, during such previous year; or

(iv) where the provisions of sub-section (4) of section 44AD (Special provision for computing profits and gains of business on presumptive basis) are applicable in his case and his income exceeds the maximum amount which is not chargeable to income-tax in any previous year,

keep and maintain such books of account and other documents as may enable the Assessing Officer to compute his total income in accordance with the provisions of this Act.

Conclusion:-

So, the persons who are not covered in the list of professions specified under Section 44 AA(1) which are mentioned above are mandatorily required to maintain their books of accounts only if:-

1. If the Income from Business or Profession exceeds Rs. 1,20,000 or the Total Sales/ Turnover/ Gross Receipts exceeds Rs. 10,00,000 in any of the previous 3 years. 

(These limits have been increased to Rs. 1,50,000 and Rs. 25,00,000 respectively from Financial Year 2017-18 onwards.)

2. If the Business or Profession is newly set-up, it would be required to maintain books of Accounts if the income from business or profession is likely to exceed the limits mentioned above.

3. If the taxpayer is covered under Section 44AE/ Section 44BB/ Section 44BBB and the taxpayer has claimed his income in the income tax return to be lower than the profits or gains deemed under Section 44AE/ Section 44BB/ Section 44BBB respectively.

4. If the taxpayer is covered under Section 44AD and his income exceeds the maximum amount which is not chargeable to income-tax in any previous year.

Author   : CA Sunil Goel
Contact : +91-7289008975
Email     : slgoelassociates@gmail.com
Website : www.casunilgoel.com