Business Tax Accounting

Business Tax Accounting

Business owners and Professionals should maintain proper books of accounts, as per Income Tax Act. 'Books of Account' includes,

  1. Ledgers,

  2. Day-Books,

  3. Cash-Books,

  4. Account-Books and

  5. Other books.

Note:

'Books of Account' including, ledgers, day-books, cash books, account-books and other books, can be kept in the,

  1. Written form, or

  2. as print-outs of data stored in a floppy, disc, tape, or

  3. any other form of electro-magnetic data storage device.

Various business tax accounting softwares are available in the market to make the process easy.

Here, let's see where and how long you should keep the books? etc.

On this page:

Place of Maintenance of Books of Accounts

As per Income Tax Act, the books of accounts are to be maintained at the principal place of Business or Profession.

In case if you are carrying on your business or profession as branches at more than one place, you can have separate books of accounts at branch level.

If the previous year has come to end, you need not keep the previous year books of accounts at the place of business.

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Books needs to be Maintained

As per section 44AA of the Income Tax Act, with rule 6F, the following books needs to be maintained.

1. Business Tax Accounting for Business Owners

If you are Carrying on Business, and if your business,

  • Gross Receipt is greater than Rs.10 lakhs**, or

  • Income is greater than Rs.1.20 lakhs**, or

  • Income offered is less than Presumptive Incomes u/s 44AD or 44AE or 44AF or 44BB or 44BBB, then

you have to maintain Books of accounts and other documents that may enable the Assessing Officer to compute the total income in accordance with the provisions of this Act.

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2. Professionals

If you are Carrying on the Profession of,

  • Legal, or

  • Engineering, or

  • Medical, or

  • Architectural, or

  • Accountancy, or

  • Technical Consultancy, or

  • Interior Decoration, or

  • Authorised Representative, or

  • Cameraman, or

  • Director, or

  • Music director, or

  • An art director, or

  • Dance director, or

  • Editor, or

  • Singer, or

  • Lyricist, or

  • Story writer, or

  • Screen-play writer, or

  • Dialogue writer, or

  • Dress designer, and

if your gross receipt is greater than Rs.1.50 lakhs**, then you have to maintain the following Books of accounts.

  1. Cash Book,

  2. Journal (Mercantile system),

  3. Ledger,

  4. Carbon copies of bills/receipts issued for amount exceeding Rs.25,

  5. Original bills/receipts from others for payments.

Note: If payments do not exceed Rs.50, own vouchers can be placed or adequate particulars of the payment can be narrated in cash book.

If the gross receipt is less than Rs.1.50 lakhs**, then you have to maintain books of accounts and other documents that may enable the Assessing Officer to compute the total income in accordance with the provisions of this Act.

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3. Medical Professionals

If you are Carrying on any Medical Profession, then irrespective of the gross receipt, you have to maintain the following books in addition to the books listed above (Item No.2).

  1. Daily Cash Register in Form 3C,

  2. Inventory of drugs, medicines and other consumables on the First and last day of the previous year.

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4. Other Professionals

If you are Carrying on any Other Profession, and if,

  • Gross receipt is greater Rs. 10 lakhs**, or

  • Income is greater Rs. 1.20 lakhs**, then

you have to maintain books of accounts and other documents that may enable the Assessing Officer to compute the total income in accordance with the provisions of this Act.

** Note:

If the gross receipt or Income exceeds the given limit,

  • in any one of the three immediately preceding previous years, or

  • likely to exceed in the first year of commencement of business or profession.

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Business Tax Accounting Period of Holding

The period of retaining or holding books of accounts is as under: -

  • Normal Period of holding is 6 years.

  • If assessment is pending under section 147 at the expiry of above period of 6 years, you have to retain the books till the time of completion of assessment.

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Business Tax Accounting Penalty

You may have to pay the penalty of Rs.25,000 if you don't maintain books of accounts as per Income Tax Act.

The Assessing Officer of Commissioner of Income-tax may direct you to pay the penalty for not

  • keeping, or

  • maintaining, or

  • retaining,

the books of accounts.

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