The book of accounts is among the most important records for the income tax department as well as the tax-paying citizen. It can help regulate the tax slab you are in, the amount to be deducted as per specific payments and investments, the sources of income and also helps in keeping track of the income variations. They also help as a reference point for filling up IT return forms and the audit proof of these accounts serve a very important purpose, especially for the high income businesses or professions.
If the gross receipts for a company, business or even a newly-setup business is more than INR 1,50,000 in the three immediately preceding years, one has to be careful to maintain a book of accounts. These accounting records are said to be required under Rule 6F.
Under Section 44AA, one has to satisfy the following two conditions to maintain the books of account-
The same rules apply for a freelancer doing any of the above profession and earning more than INR 1,50,000. The professional won’t be required to maintain the books of accounts under section 44AA if the gross receipts of the above mentioned professions are not more than INR 1,50,000 for any one or more of the preceding three years for any existing or newly setup profession whose incomes are not expected to be more than the said amount. In such cases, some books of accounts are made so that the Accounts officer is able to compute the taxable income of the respective professional.
There are several types of books of accounts which can be created in order to keep the records. The following are the specified books of accounts which must be maintained as per the Rule 6F of the IT Act.
All these books should be maintained at the Head Offices. It is essential that each year’s books must be kept for a period of six years. The task of maintaining these books of accounts is an important one for various purposes for the sake of keeping a record, and the failure to maintain these books cause a penalty of INR 25000. In the case of international transactions, 2% of the value of each transaction is taken as penalty in case of failure of keeping the accounts. Thereby, it is extremely important to maintain a record of these accounts in a diligent and responsible manner in the most methodical way for the best results.
The Audit Report Form is the form which has to be filled by all the taxpayers by September of the Assessment year. The form has two variants – Form 3CA and Form 3CB. While the form 3CA is filled by a person carrying on business or profession requiring a compulsory audit, the form 3CB is filled by those persons other than the enlisted professions as defined in Section 44AD and Section 44AE. The statement form 3CD is given along the audit form 3CA and the form 3CD is given along section 3CB. The Statement Form is also a mandatory one to be filled along with the Audit Form during the submission of the report before the deadline of 30th September of the respective Assessment year.
There’s a fixed penalty if the taxpayer fails to maintain the accounting records as per the Section 44AA, and the penalty is levied under Section 271A. The maximum penalty is charged at the limit of INR 25,000. The penalty may also be avoided if the taxpayer can provide any reasonable justification for the failure in maintaining the records.
If the taxpayer fails to get the account records audited and furnish the entire report as per the requirements of Section 44AB, the penalty is charged under section 271 B. In this case, the minimum penalty levied is 0.5% of the total sales or turnover or gross receipts. Again, the maximum penalty charged is INR 150000. Also, if the taxpayer has a valid enough reason for the ill maintenance of accounts, the person may be excused of the penalty.
The booking of accounts and its auditing is an important procedure while getting the audit report and file an income tax return of an individual or a company. Several amendments have been made which have raised the limits of the amounts and it provides a greater margin to determine which persons and associations need to keep an account. Most changes have been given effect from the Assessment Year 2018-19 and are only applicable to individuals and HUFs (Hindu Undivided Family), who are residents of India. The audit report is extremely important for companies and business with larger incomes and greater turnover rates as defined above. There are cases of exception as defined under other sections of the income tax act, following which is necessary for the final procedure.
Ans. Books of accounts/accounting records have to be maintained if the gross receipts are more than Rs. 1,50,000 in 3 preceding years for an existing profession.
Ans. Turnover of business in trading/ manufacturing concern is Rs 2 crore.
Ans. Every registered person must maintain records of : Production or manufacture of goods, Inward and outward supply of goods or services or both (Purchase and Sales Register), Stock of goods (Inventory Register), Input tax credit availed (Electronic Credit Ledger), Output tax payable and paid and (Electronic Liability and Electronic Cash Ledger), Records of goods or services imported or exported or Records of supplies attracting payment of tax on reverse charge along with the relevant documents, including invoices, bills of supply, delivery challans, credit notes, debit notes, receipt vouchers, payment vouchers, refund vouchers and e-way bills.
Ans. No, you cannot audit your own accounts.
Ans. Audited accounts are prepared by an accountant and are then audited, which is process whereby they check a random number of transactions have been processed accurately. Unaudited accounts are also prepared by an accountant but such accounts are audited.
Ans. No, auditor check the transactions on random basis.
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