Maintenance of Books of Accounts and Audit

Under Section 44AA, certain records and books of accounts have to be maintained by the assessee. A person carrying on any profession in legal, medical, engineering, architecture, accountancy, technical consultancy, interior decorator, authorized representative, film artist, company secretary is required to keep and maintain books of accounts and documents as specified:-

  • Cash Book i.e. maintaining records of all cash receipts and payments from day to day basis and giving the cash balance at the end.
  • A journal –if accounts are maintained on mercantile system of accounting.
  • A ledger
  • Carbon copy of bills and receipts over Rs. 25, wherever such bills or receipts are issued.  Bills and receipts should be machine numbered or serially numbered.
  • Original bills wherever issued to the person and receipts in respect of expenditure incurred by the person or where the bills or receipts are issued and the expenditure exceeds Rs. 50, such payment voucher must be prepared and signed by the person authoring the same.

The books of accounts and other relevant documents are required to be kept and maintained at a principal place of business, which must be preserved for a period of 6(six) years from the end of relevant assessment year.

If an individual carrying on profession other than professions mentioned above or carrying on any business, having annual income from profession or business exceeding Rs. 2,50,000 or gross receipts exceeds Rs. 25,00,000 is required to maintain books of accounts and documents.

Penalty of Rs. 25,000 will be imposed on failure to keep, maintain and retain such records.

Persons opting for presumptive income scheme benefit for business/profession are not required to maintain any books of accounts.

Audit of Accounts of Certain Persons

As per section 44AB, it is obligatory for a person to get his accounts audited before the specified date by a Chartered Accountant. Audit of accounts is applicable only if the total sales turnover or gross receipts from the business for the accounting year exceeds Rs. 2 Crore.  For assesses not covered under section 44AD like company, LLP are required to get their accounts audited if their turnover exceeds Rs. 1 Crore. A person carrying on profession also has to get his accounts audited if his gross receipts from the profession exceed Rs. 50lacs in the accounting year. 

Penalty of Rs. 1,50,000 or 0.5% of turnover, whichever is lower will be imposed on failure to comply with above audit provision.

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