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Compulsory maintenance of books of accounts as per section 44aa(1)

Rajan (Service) (157 Points)

23 March 2016

Dear Members, I would like to know if the provision of section 44AA(1) applies to Tax Practitioners non CA, CS. Can tax practitioners (non CA/CS) file income tax returns under presumptive scheme 44AD and declare profit more than 8% where mantainance of books of accounts is not compulsory. Please advice. Thank you.

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SANGAMESWARAN.N (Senior accountant) (116 Points)
Replied 25 March 2016

Section 44AA of Income Tax Act and rule 6F of Income Tax rules deal with the provisions regarding maintenance of books of accounts under Income tax Act. As per section 44AA(1) read with rule 6F the persons carrying on any of the profession as mentioned below are required to maintain books of accounts and other documents as may enable the assessing officer to compute total income, if yearly gross receipts of the profession exceeded Rs. 150,000.

Legal
2. Medical
3. Architectural
4. Engineering
5. Accountancy
6. Technical consultancy
7. Interior decoration
8. authorized representative
9. film artist
10. any other profession as is notified by the board

No books of accounts are required to be maintained by professionals covered u/s 44AA(1):

If the gross receipts of a profession do not exceed Rs. 150,000 in any one of the three years immediately preceding the previous year or where the profession has been newly setup in the previous year, total gross receipts in the profession for that year are not likely to exceed the said amount, then such professional need not to maintain any books of accounts.
It means that if the gross receipts of a profession exceed Rs.150,000 in all the three years preceding the previous year only then the books of accounts will be required to be maintained, if the gross receipt exceed the prescribed limit in the two preceding years but not in the third preceding year then there will be no need to maintain books of accounts.

Maintenance of Books of accounts by other Persons covered u/s 44AA (2):
In relation to any other persons engaged in any other profession or carrying on any business other than section 44AA (1), the requirement of compulsory maintenance of books of accounts applies if- either the income from business or profession exceeds Rs 120000 or the turnover or gross receipts exceed Rs 10 Lakhs in any one of the three years immediately preceding the previous year.

No books of accounts are required to maintained by other persons covered u/s 44AA (2):
If the Income or the gross receipts or gross turnover of a person carrying on business or profession other than profession as mentioned u/s 44AA (1) do not exceed in any one of the three years preceding the previous year then no books of accounts will be required to be maintained.

The presumptive taxation scheme of section 44AD is designed to give relief to small taxpayers engaged in any business (except the business of plying, hiring or leasing of goods carriages referred to in section 44AE).

Eligible persons who can take advantage of the presumptive taxation scheme of section 44AD The presumptive taxation scheme of section 44AD can be adopted by following persons : 1) Resident Individual 2) Resident Hindu Undivided Family 3) Resident Partnership Firm (not Limited Liability Partnership Firm) In other words, the scheme cannot be adopted by a non-resident and by any person other than an individual, a HUF or a partnership firm (not Limited Liability Partnership Firm).

"Apart from above discussed businesses, a person carrying on profession as referred to in section 44AA(1)is not eligible for presumptive taxation scheme".

A person whose total turnover or gross receipts for the year exceed Rs. 1,00,00,000 cannot adopt the presumptive taxation scheme of section 44AD The presumptive taxation scheme of section 44AD can be opted by the eligible persons, if the total turnover or gross receipts from the business do not exceed the limit of audit prescribed under section 44AB (i.e., Rs. 1,00,00,000). In other words, if the total turnover or gross receipt of the business exceeds Rs. 1,00,00,000 then the scheme of section 44AD cannot be adopted.

The meaning of above explanation is that, you have to fix weather you are come under 44aa(1) or 44aa(2), and if you are come under any of the section, and you have to check the condition mentioned above to maintain the books.

If you are adopting the presumptive taxation then you don’t have to maintain the books, but gross receipt of the business exceeds Rs. 1,00,00,000 then the scheme of section 44AD cannot be adopted, otherwise adopt it. But if his total income is below the exempted limit and profits are also declared below 8% of gross turnover or gross receipts then he will need not to maintain books of accounts.

You can show more than 8% income in return, but confirm that the gross income is not exceeding Rs.10000000.

Regards….

Rajan (Service) (157 Points)
Replied 27 March 2016

Thank you Sangam eswarnji. But still I am not able to understand as to whether a tax practitioner (Tax Accountant non CA) can use the ITR Form 44AD to file Income Tax Return.

Please suggest.

SANGAMESWARAN.N (Senior accountant) (116 Points)
Replied 28 March 2016

You can't use this provision of section and you have to use ITR-4 for fileing the return of income tax. because, you are doing a profession, it need accounting and legal knowledge to conduct, thatwhy you have to file the return by using ITR-4.