The Income Tax Act has specified the books of accounts that are required to be maintained for the purpose of Income Tax. These have been prescribed under section 44AA and Rule 6F.
The following professions should maintain accounting records if their gross receipts are more than Rs. 1,50,000 in 3 preceding years for an existing profession. This also applies to a newly set up profession whose gross receipts are expected to be more than Rs. 1,50,000. The accounting records to be kept have been prescribed in Rule 6F:
- Technical consultancy
- Interior decoration
**Authorized representative** — A person who represents someone for a fee before a tribunal or any authority constituted under law. It does not include an employee of the person so represented or someone who is carrying on the profession of accountancy.
Film artist — This includes a producer, editor, actor, director, music director, art director, dance director, cameraman, singer, lyricist, story writer, screen play or dialogue writer and costume designers.
If you are a freelancer pursuing any of these listed professions and your gross receipts are more than Rs. 1,50,000, these rules shall apply to you.
If the gross receipts of the Professions listed above are not more than Rs 1,50,000 in any one or more of the preceding 3 years for an existing profession or for a newly set up profession whose gross receipts are expected to be less than Rs 1,50,000 – the professional has to maintain books of accounts. What all books or records should be kept has not been exactly specified. The only condition is the AO should be able to compute the taxable income of the professional from them.
Specified books of account as per Rule 6F
- Cash book
- A record of day to day cash receipts and payments which shows cash balance at the end of the day or at best at the end of the each month and not later.
- A journal according to mercantile system of accounting
- A journal is a log of all day to day transactions. It is a record, in accounting terms, where total credits equal total debits, when we follow the double entry system of accounting ie each debit has a corresponding credit and vice versa.
- A ledger where all entries flow from the journal, has details of all accounts, this can be used to prepare the financial statements.
- Photocopied of bills or receipts issued by you which are more than Rs 25
- Original bills of expenditure incurred by you which are more than Rs 50
**Following are the additional requirements in case of a person carrying on medical profession — physicians, surgeons, dentists, pathologists, radiologists, etc.**
- Daily cash register with details of patients, services rendered, fees received and date of receipt
- Details of stock of drugs, medicines, and other consumables used
These books should be maintained at the Head Office or at each of the offices.