Maintenance of Books of Accounts under Various Laws

Maintenance of Books of Accounts

Books of accounts including bills and receipts and that is required to be maintained under different statutory laws – Income Tax Act, Companies Act 2013 and GST Act. Books to be maintained, and it is mandatory to retain for a period and compulsion requirements are different under all the 3 laws.

As per Income Tax Act

Under IT Act, If the turnover/gross receipts from the business or profession is more than Rs. 25 lakhs or the income from business or profession is more than Rs. 2.5 lakhs in any of the 3 preceding years, then It is mandatory to maintain books of accounts.

These following professions are covered under the provision –

Legal
Engineering
Architectural
Accountancy
Medical
Technical consultancy
Interior decoration
Authorised Representative (the person who charges fees for representing someone before tribunal or any authority)
Film artist (editor, actor, director, music director, art director, dance director, cameraman, singer, lyricist, producer, story writer, screenplay or dialogue writer and fashion designers.
Company secretary (CS)

Therefore, if the above-mentioned professions have an income of more than Rs. 2.5 lakhs in any of the 3 preceding years, they need to prepare and maintain books of accounts. In case of any new profession, if the income is expected to be more than Rs. 2.5 lakhs, the professionals should maintain books.

Books of accounts as per Rule 6F

Cash Book
Journal
Ledgers
Bills and receipts copies
Daily cash register having details related to all patients, services rendered, fees received and date of receipt (for medical profession)
Details related to stock of medicines, and other consumables used (for medical profession and pharmaceuticals)

If the income is n exceeding the limit of Rs. 2.5 lakhs in any of the 3 preceding years or not expected to be more than Rs. 2.5 lakhs in case of a new profession, then also books should be maintained. In this case books haven’t been specified – therefore any books can be maintained but it should be in manner that ATO can calculate the income.

What is the time limit to maintain books of accounts?

Books should be maintained for the period of 6 years. It is applicable from the end of the relevant year.

Under the Companies Act

As per Companies Act Every company has to maintain books of accounts, at the registered office or any office that board of directors may decide. If the company is maintaining books at an office other than the registered office, it is mandatory to intimate the same to ROC (Registrar of Company). The company can also maintain the electronic accounts.

What is the time limit to maintain books of accounts?

Books should be maintained for a period of at least 8 years from the end of the relevant financial year.

Books of accounts should be maintained

Cash flow statement
Sales and purchases Register,
Assets and liabilities Register
Items of cost
Contract papers, vouchers, writing, documents, minutes, and registers whether in physical or electronic mode

Under GST Act

As per GST Act, every registered person has to maintain GST records at the principal place of business.

Records to be maintained

Production of goods
Sale or purchase of goods and services or both
Stock of goods
Input tax credit claimed
Output tax payable and paid and
Other particulars as may be prescribed of laws

For how long should the records be maintained?

Books and records should be maintained for at least 6 years from the last date of filing of the annual return (31st December) for that year.

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