cash based accounting system

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rahul (Querist)
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25 May 2009 1. Can we change the method of accounting from Cash based to accural based. If yes, do we need prior approval from the income tax authorities or do we need to inform them about the changes.

2. Can the books kept on the cash based accounting be assessed under accural based accounting by the assessing officer.

3. Do we have to deduct TDS for the expenditure accured but not paid during the year under cash based accounting.

Awaiting an earliest reply.

Thank you in advance.

CA.BHARAT BHUSHAN

CA.BHARAT BHUSHAN (Expert)
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25 May 2009 Yes, we can change the method of accounting and there is no need to take any prior approval from Income Tax Authority....However in case of Tax Audit, auditor will report this issue.BUT, in case of coporates, Companies Act permits only mercantile method.

No A.O. cannot assess the income of the assessee arbitrarily by using other method of accounting

In case of cash basis of accounting, there is no question of accrual.

CA Nitin Wadhwani

CA Nitin Wadhwani (Expert)
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25 May 2009 Only the last answer given by CA.Bharat is incorrect.
Tax needs to be deducted as provided i.e on basis of accrual or payment whichever is less.

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