Account Books Required to Maintain under Income Tax & GST Act

The Income Tax Act and the Goods and Services Act (GST) both contain different provisions regarding the maintenance of books of accounts, respectively. It is common for people to keep records of their daily expenses and incomes. In accordance with the Income Tax Act, some individuals are required to keep and maintain records of daily expenses, receipts, cash transactions, bank transactions, etc.

The Income Tax Act specifies that only specified persons are required to keep daily books for daily transactions. To file income tax returns, prepare profit & loss statements, balance sheets, and other transactions, you should keep and maintain some account books. A tax assessment is based on these records, which are important to the Income Tax department and the Goods and Service Tax department.

Our goal in this article is to explain how many books businesses or professions are required to maintain physically or electronically under the Income Tax and GST laws.

Account Books Requirement under Income Tax Act

Accounts books maintained by business or profession under Income Tax Act: In any of the three immediately preceding years, a business or profession with gross receipts, sales, or turnover exceeding Rs. 25,00,000 or income/profit more than Rs.2,50,000 must maintain the following account books.

Updates: From AY 18-19, the limit of Rs. 120,000 has been increased to Rs. 250,000 and Rs. 10,00,000 to 25,00,000.

  • Ledgers
  • Cash Book
  • Journal
  • The photocopies of any bills or receipts you have issued that exceed 25 rupees, Original bills of expenditure that exceed Rs 50 that you have incurred
  • A daily cash register with details of the patients, services rendered, fees received, and date of receipt (for people who carry on medical professions)
  • The stock of drugs, medicine, and consumables used in the practice of medicine (for those engaged in the profession of medicine)

By Professionals: The professionals like accountant, engineers, software engineers, doctors, architects, Interier designers, actors, Ars and consultants shall maintain the books of account if the gross receipt for a previous year is Rs.2,50,000/- or more ‘Or’ in any three years immediately preceding the previous year. It is compulsory for them to maintain the following books of account.

For Professions and Businesses covered under section 44AD and 44AE: Businesses covered under section 44AD and 44AE are not required to maintain any books of accounts. However taxpayers who claim that their income from business is lower than the presumed income calculated under section 44AD and 44AE must maintain books of accounts which may enable the Assessing Officer to calculate their taxable income as per the Income Tax Act. No specific records are prescribed.

Other Persons: If a person does not come under profession or business as mentioned above, then Income Tax department advised that maintain at least cash book and ledger to avoid any arbitrary estimate of Income by Assessing Officer u/s 144.

Penalty for failure to Maintain Books of Accounts or accounts: As it mentions above the books of accounts are compulsory for above specified persons u/s 144AA and Rule 6F. So there is a provision of penalty of Rs. 25000/- on failure to keep and maintain for books of accounts. The penalty for failing to maintain information and documents for international transactions would be 2% of the value of the transaction.

Books of Accounts Computerised or Manually:  The method of accounting should be in cash or mercantile system. Assessee can maintain books of account manually or in computerized system. There are lots of  accounting software in the marketing for book keeping, the most popular software is tally 9 ERPMost of the businessman and professionals nowadays are using computerized system as it easy and fast to maintain books. We are advised to business man and professionals that follow accounting standards as prescribed by Income Tax Act.There is also a provision in Income Tax Act for audit of account books. You can check here latest article about compulsory audit of accounts.

Account Books Requirement under GST Act

According to the GST Act, every person who is registered under the GST Act must maintain a set of books of account at his principal place of business in computerised sytem or manually.

Accounting Books: The following books of accounts are required to maintained by registerd person.

  • Inward and outward supply of goods or services or both
  • Stock in Hand Register
  • ITC Availed Account
  • Output Tax Paid or Adjusted
  • Other Accounting Books like Cash book, Ledger, Sale Register, Purchase Register etc.

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