Section 44AA PERSONS REQUIRED TO MAINTAIN BOOKS OF ACCOUNTS

Section 44aa of income tax act:

Maintenance of accounts by certain persons carrying on profession or Business

44aa(1) Every person carrying on the Legal, Medical, Engineering, Accountancy or Interior Decoration or any other profession as notified by CENTRAL BOARD OF DIRECT TAXES (CBDT) are required to maintain such books of accounts & other documents as may enable the Assessing Officer to compute Assessee’s total income in accordance with provisions of this act.

(2) Following are the persons who are required to maintain books of accounts:-

(i) Person carrying on business or profession if his total income exceeds Rs.1,20,000 or his total Turnover or Gross Receipts in the business or profession exceeds Rs.10,00,000 in any of the 3 years immediately preceding the previous year.

(ii) Where the business is newly setup, if his total income is likely to exceed Rs.1,20,000 or his total Turnover, Gross Receipts likely to exceed Rs.10,00,000.

(iii) where the profits and gains from the business are deemed to be the profits and gains of the assessee u/s 44AE or 44BB or 44BBB and assessee has claimed his income to be lower than the profits and gains so deemed to be the profits and gains of his business.

    (iv) where the profits and gains from the business are deemed to be the profits and gains of the assessee under section 44AD and he has claimed such income to be lower than the profits and gains so deemed to be the profits and gains of his business and his income exceeds the maximum amount which is not chargeable to income-tax during such previous year,

     Following clause (iv) shall be substituted for the existing clause (iv) of sub-section (2) of section 44AA by the Finance Act, 2016, w.e.f. 1-4-2017 : where the provisions of sub-section (4) of section 44AD are applicable in his case and his income exceeds the maximum amount which is not chargeable to income-tax in any previous year,

Rule 6F: Books of Account to be maintained:

Every person carrying on Legal, Medical, Engineering or Architectural Profession or Profession of Accountancy or Interior Decoration or Film Artist or Authorized Representative if his Gross Receipts exceeds Rs.1,50,000 in all the three years immediately preceding the previous year or

Where the profession has been newly set up in the previous year his gross receipts are likely to exceed Rs.1,50,000 in that year.

    BOOKS TO BE MAINTAINED

The following books of accounts and documents are required to be maintained:-

• Cash book;
• Journal;
•  Ledger;
• Carbon copies of the bills and receipts issued by the person in relation to sums exceeding Rs.25;
• Original bills and receipts issued to the person in respect of the expenditure incurred.

PERIOD FOR WHICH THE BOOKS & OTHER DOCUMENTS TO BE MAINTAINED

The above books of accounts and other documents shall be kept and maintained for a minimum period of 6 years from the end of relevant assessment year. If an assessment in relation to any assessment year has been reopened u/s 147 all the books of accounts and other documents shall continue to be kept and maintained till the assessment so reopened has been completed.

PLACE WHERE BOOKS TO BE MAINTAINED

The books and documents shall be kept and maintained at the place where the person is carrying on the profession or where there is more than one place at the principal place of business.

Amendment of section 44AA.

24. In section 44AA of the Income-tax Act, in sub-section (2), for clause (iv), the following clause shall be substituted with effect from the 1st day of April, 2017, namely:—

"(iv)

where the provisions of sub-section (4) of section 44AD are applicable in his case and his income exceeds the maximum amount which is not chargeable to income-tax in any previous year,"

(Last Amended 1.4.2016)

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SECTION 44AD (PRESUMPTVE TAXATION(A\Y 2013-14)

Applicable    : Any business except plying, hiring, or leasing goods carriage referred U/s 44AE and whose turnover is less than 100 lacs. It covers manufactures, jobworkers, processing industry and wholesalers

Eligible Assessee  : Any resident Individual ,HUF, Partnership firms(excluding LLP) and who has not claimed deduction u/s 10AA or deduction under any provision of chapter VI-A under heading “C-Deduction in respect of certain incomes”

There has been insertion by finance act 2012 in section 44AD to exclude applicability of presumptive provision on following:-

· Person carrying profession as mentioned u/s 44AA(1) –legal, medical,  
  engineering, or architectural or accountancy profession or technical 
  consultancy or interior decoration or any other profession notified by the 
  board.

· Person earning commission in nature of brokerage.

· Person carrying agency business

CERTAIN OTHER POINTS OF CONSIDERATION

· An assessee opting for the above scheme shall be exempted from  
  maintenance of books of account related to such business as required under 
  section 44AA.

· The assessee can voluntarily declare a higher income in his return

· An assessee opting for the above scheme shall be exempted from payment 
  of advance tax related to such business.

· In the case of assessee being firm, the normal deduction in respect of salary 
  and interest paid to the partners shall be allowed as deduction out of such 
  presumptive income subject to conditions and limits specified in clause (b) 
  of section 40.

· In case assessee claims that he has earned income lower than specified 
  percentage and such income is more than maximum amount not chargeable    
  to tax, Ss. 44AD(5) and 44AA(2)(iv), mandates him to maintain books of 
  accounts and other documents as specified u/s 44AA, get them audited from 
  the accountant and furnish report as required u/s 44AB.

This article is compiled by Student of ICAI SHUBHI GOEL. She can be reached at Shubhigoel1989@gmail.com

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