Compulsory Maintenance of books of account under Income Tax

There is confusion among taxpayers about maintenance of books of accounts under Income Tax Act like who is required compulsorily to maintain the books of accounts and for how many years one has to keep his books of accounts.  Some views are expressed on this topic as follows:

Maintenance of books of accounts by Professionals:Section 44AA of Income Tax Act and rule 6F of Income Tax rules deal with the provisions regarding maintenance of books of accounts under Income tax Act. As per section 44AA(1) read with rule 6F the persons carrying on any of the profession as mentioned below are required to maintain books of accounts and other documents as may enable the assessing officer to compute his total income, if yearly gross receipts of the profession exceeded  Rs 150000.

1) Legal
2)Medical
3)architectural
4)engineering
5)accountancy
6)technical consultancy
7)interior decoration
8)authorized representative
9)film artist
10)any other profession as is notified by the board

When no books of accounts are required to be maintained by professionals covered u/s 44AA(1): Proviso to Rule 6F (1) provides that if the gross receipts of a profession do not exceed Rs 150000 in any one of the three years immediately preceding the previous year or where the profession has been newly setup in the previous year, his total gross receipts in the profession for that year are not likely to exceed the said amount, then such professional need not to maintain any books of accounts as mentioned in sub rule 2 of rule 6F.

It means that if the gross receipts of a profession exceed Rs 150000 in all the three years preceding the previous year only then the books of accounts will be required to be maintained, if the gross receipt exceed the prescribed limit in the two preceding years but not in the third preceding year then there will be no need to maintain books of accounts as contemplated in sub rule 2 of rule 6F.

Maintenance of Books of accounts by other Persons covered u/s 44AA (2): In relation to any other persons engaged in any other profession or carrying on any business other than section 44AA (1), the requirement of compulsory maintenance of books of accounts applies if- either the income from business or profession exceeds Rs 120000 or the turnover or gross receipts exceed Rs 10 Lakhs in any one of the three years immediately preceding the previous year.

When no books of accounts are required to maintained by other persons covered u/s 44AA (2): If the Income or the gross receipts or gross turnover of a person carrying on business or profession other than profession as mentioned u/s 44AA (1) do not exceed in any one of the three years preceding the previous year then no books of accounts will be required to be maintained u/s 44AA (2).

Presumptive Income scheme: The  persons who are filling their return of income under the presumptive income scheme like under section 44AD or 44AE or 44AF etc are not require to compulsorily maintain books of account u/s 44AA. However where the profits and gains from the business are deemed to be profits and gains u/s 44AD or 44AE or 44AF or 44BB or 44BBB as the case may be, and the assessee has claimed his income to be lower than the profits or gains so deemed, then the books of accounts will be required to be maintained u/s 44AA.