Every business and startup’s major concern revolves around taxation and the ways to ensure that they don’t get stuck in assessment or scrutiny undertaken by the Department of Income Tax. Majority of the businessmen don’t possess a proper understanding regarding the books of accounts to be kept, and when to get them audited. This article aims at creating awareness about this matter.
The maintenance of books of accounts can be classified as under:
As per Section 44AA(1), persons carrying on below mentioned professions are mandatorily required to maintain books of accounts:
Persons who are not covered above, but are carrying on a profession shall maintain books of accounts,if:
In case of start-ups, the person is required to maintain book of accounts if his income or gross receipt is likely to exceed the above amount.
If in the above case the person is an Individual or Hindu Undivided Family, the above limit of Rs 1,20,000 and Rs 10,00,000 is replaced by Rs 2,50,000 and Rs 25,00,000, respectively.
Persons who are engaged in business shall maintain books of accounts if:
In case of start-ups, the person is required to maintain books of accounts if his income or turnover is likely to exceed the above mentioned amounts.
If in the above case the person is an Individual or Hindu Undivided Family, the above limit of Rs1,20,000 and Rs10,00,000 is replaced by Rs2,50,000 and Rs25,00,000 respectively.
The above person shall maintain following books of accounts so as to help the assessing officer ascertain the income:
In case of a Medical Practitioner,the following books apart from those mentioned above need to be maintained:
The books should be kept at either head office or each office, and should be maintained for a period of six years from the end of the year.If the person does not maintain such books, a penalty of Rs 25,000 can be levied.
The above persons shall get their accounts audited by a practicing chartered accountant and file the tax audit report by 30th September of the assessment year.
Hence proper maintenance of books of accounts, and getting them audited if required, helps the Income tax officer making assessment compute the income liable to tax, and ensures full disclosure and avoids chances of attracting any penalty or scrutiny.
CA Ankita Mathur (business services-H&R Block India Private Limited), author of this article, can be reached for assistance regarding GST compliant invoicing at firstname.lastname@example.org.