Do I Always Need To Maintain Books Of Accounts?

Each and every entrepreneur, once he/she starts their business or profession, should always keep in mind about maintaining the books of accounts for their business & profession. To understand the compliances and requirements, one has to look at the provisions under which books of accounts are required to be maintained – Income Tax Act, The Companies Act and The Goods & Services Tax Act (GST).

Primarily if a business or profession starts as a One Person Company or a Private/Public Limited Company or an LLP, it has to mandatorily maintain its books of accounts from the date of incorporation of the business or profession, as required by The Companies Act. 

Similarly, if a business or profession starts as a Sole Proprietorship firm or as a Partnership firm and it is registered under GST law, it has to mandatorily maintain books of accounts as per the requirements of GST law.

Now, if a business or profession starts as a Sole Proprietorship firm or as a Partnership firm or as a HUF and it is not registered under GST law, it has to maintain books of accounts as per the requirement of The Income Tax Act, which can be summarised as below:

Income Tax Law makes a mandatory requirement for businesses and professionals to maintain books of accounts as per Section 44AA and Rule 6F.

1. In case a person carrying on a specified profession such as
   1. Legal
   2. Medical
   3. Engineering
   4. Architectural
   5. Accountancy
   6. Technical Consultancy
   7. Interior Decoration
   8. Authorized Representative
   9. Company Secretary
   10. Film artist

would be required to maintain the book of accounts if his or her gross receipts are more than Rs.1,50,000 in the previous three years.

Moreover, in case the person carrying on the specified profession and the gross receipts for the year is less than Rs. 50.0 lakhs and if he is claiming 50% of the gross receipts as profits & gains from Business & Profession it doesn’t required to maintain books of accounts.

1. In case of other Businesses or Professions it is not mandatory to maintain books of accounts in the following cases:

• if the income does not exceed Rs.2,50,000 during the current year or if total sales or turnover or gross receipts does not exceed Rs.25 lakhs in any one of the previous 3 years.
• Where in case of a new business or profession, if the income is not expected to exceed Rs 2,50,000 or the total sales or turnover or gross receipts are not expected to exceed Rs 25 lakhs.
• If the business has turnover of less than Rs. 2 crores and has shown a profit as 8% of the turnover.
• If the business is of plying, hiring and leasing of goods carriages and having less than 10 vehicles and income is shown at a rate of Rs. 1000/- per ton per month per vehicle for Heavy Good Vehicle and at a rate of Rs. 7500/- per month per vehicle for light Good Vehicle.

In all other cases, Specified books of account to be maintained as per Rule 6F of the Income Tax Act.

Specified Books of Accounts to be maintained

Period of maintenance of Books of Accounts