Maintaining proper books of accounts is an important part of tax compliance for businesses and professionals. Under Section 62 of the Income-tax Act, 2025, certain taxpayers are required to prepare and maintain books of account when their income, gross turnover or receipts cross the prescribed limits.
The rules differ depending on whether the taxpayer is engaged in a specified profession, a non-specified profession, a business covered by the presumptive taxation scheme, or another business.
Who Is Required to Maintain Books of Accounts?
The requirement depends primarily on the nature of the business or profession and the applicable income or turnover thresholds.
1. Specified Professions
Specified professionals generally have to maintain books of accounts irrespective of their gross receipts or income, except where an applicable presumptive taxation scheme is opted for.
The specified professions include:
- Legal profession
- Medical profession
- Engineering
- Architecture
- Technical consultancy
- Interior decoration
- Film artists
- Authorised representatives
- Accountancy profession
- Company secretaries
- Information technology
This makes record-keeping particularly important for professionals such as CAs, lawyers, doctors, engineers and architects.
2. Non-Specified Professions
For non-specified professionals, the requirement is linked to income or gross receipts.
For an individual or HUF, books are required where, in any of the three years immediately preceding the tax year:
- Professional income exceeds Rs 2.50 lakh, or
- Gross receipts exceed Rs 25 lakh.
For other taxpayers, the corresponding limits are:
- Income exceeding Rs 1.20 lakh, or
- Gross receipts exceeding Rs 10 lakh.
If the profession has been newly established during the tax year, the threshold is considered with reference to the income or gross receipts of the current year.
What About Businesses Under Presumptive Taxation?
Businesses covered by specified presumptive taxation provisions may also have to maintain books in certain situations.
For example, a taxpayer covered under Section 58(2) [Table S. No. 1] may be required to maintain books where income exceeds the maximum exemption limit, the presumptive scheme was opted for in any of the preceding five tax years, but the taxpayer does not opt for it in the current year.
Books may also be required where the taxpayer declares profits lower than the deemed profits under the applicable presumptive taxation provisions. Similar requirements apply to certain businesses covered under Sections 58(2) and 61(2).
Books of Accounts Required Under Rule 46
Rule 46 of the Income-tax Rules prescribes the books and records to be maintained under Section 62.
For specified professions other than company secretaries and information technology, where the prescribed gross receipt condition is met, the records include:
- Cash book
- Journal, where accounts are maintained under the mercantile system
- Ledgers
- Copies of bills or receipts issued for amounts of Rs 250 or more
- Original bills and receipts for expenditure exceeding Rs 250
- Signed payment vouchers for certain expenditure of Rs 250 or less where adequate particulars are not available in the cash book.
Additional Records for Medical Professionals
Medical professionals have additional record-keeping requirements. Along with the applicable books mentioned above, they are required to maintain a daily case register in Form 25 and an inventory under broad heads covering drugs, medicines and other consumable accessories used in the profession.
For other specified professions, non-specified professions and businesses meeting the relevant gross-receipt condition, the requirement is to maintain such books of account as may enable the Assessing Officer to compute the taxable income.
Where Should Books of Accounts Be Maintained?
Books of account and related documents should generally be maintained at the place where the profession is carried on.
If the profession is conducted from multiple locations, the books should ordinarily be maintained at the principal place of the profession.
However, where separate books are maintained for each location, the respective books and documents may be kept at the corresponding places of business or profession.
How Long Should Books Be Preserved?
Taxpayers are required to retain books of account and related documents for seven years from the end of the relevant tax year.
For electronic records, the document specifies that the books should remain accessible in India at all times, with daily backups maintained on servers physically located in India.
There can also be an extended retention requirement where an assessment has been reopened under the specified provisions. In such cases, the books and documents existing at the time of reopening must be retained until the reopened assessment is completed.
Penalty for Failure to Maintain Books
Non-compliance can have financial consequences. Where an assessee fails to maintain or retain books of account and other documents for the prescribed period, a penalty of Rs 25,000 under Section 441 may be imposed.
Key Takeaway for Taxpayers
The new framework makes it important for businesses and professionals to understand whether they fall within the prescribed categories and thresholds under Section 62.
For professionals and businesses, maintaining proper books is not simply about preparing accounts at year-end. Regularly preserving invoices, receipts, ledgers, vouchers and other supporting documents can make tax compliance smoother and help ensure that taxable income can be properly determined.
Taxpayers should therefore review their books and record-retention practices in line with the applicable provisions and thresholds under the Income-tax Act, 2025 and Income-tax Rules.
CAclubindia
