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Requirement of Maintenance of Books of Accounts

 
While you set up your business with grand fanfare, reaching your dream turnover was just the first milestone, you have already begun to bother about the profitability. Maintenance of financial records is actually a way to know the true and fair position of your business. In reality, it is much more. It is also a legal requirement. 
 
Let us understand the requirement and the necessity for compulsory maintenance of accounts and audit as per Indian Income Tax Act in a simplified manner.
There are basically two categories
1. Specified Professionals
2. Non Specified Professionals
 

A. Specified Professionals

 
They include persons rendering services and having technical degrees in legal, medical, engineering, architectural/interior, accountancy, technical consultancy, information technology, film artists or any other person as notified by government. E.g.: lawyers, doctors, architects, interior designers, engineers, chartered accountants, film artists, consultants etc. Specified Professionals are non traders.
 
REQUIREMENT TO MAINTAIN BOOKS AND AUDIT
 
In case it is the first year of set up, you have to compulsorily maintain records if gross receipts are likely to exceed Rs150,000/-.
 
As per Income Tax Act, a person carrying on any profession as mentioned above is compulsorily required to maintain complete record of books of accounts if his Income(profit) from business or profession exceed Rs 1,20,000 per annum or his sales/gross receipts exceed Rs 10 lakhs in any of the three preceding years. 
 
In case the gross receipts/turnover/total sale of non-specified professionals is more than Rs 100 lakhs in the previous financial year, audit of financial records is compulsory as per Income Tax Act.
 
The Implication of these provisions is that if in any one year your sales/income goes below the threshold limit, you are still required to maintain books of accounts unless sales/income falls continuously for three years in a row in which case in the fourth year the provision shall not be applicable.