Tag: ooks Of Accounts

Under Section 58 of the Income-tax Act, 2025, specified persons carrying on business or profession are required to maintain prescribed books of account and other documents. The purpose is to enable the Assessing Officer to properly compute the taxpayer’s total income in accordance with the Act. The requirement to maintain books depends upon the nature of business or profession and the prescribed conditions, including relevant income or turnover limits. Specified professionals may also be required to maintain prescribed records. Proper books provide reliable evidence of income, expenditure, assets and liabilities and facilitate accurate computation, assessment and verification of taxable business or professional income.

Persons Required to Maintain Books of Account under Section 58:

1. Persons Carrying on Specified Professions

Under Section 58(1), a person carrying on a legal, medical, engineering, architectural, accountancy, technical consultancy, interior decoration or other notified profession is required to maintain prescribed books of account and documents where the conditions prescribed under the Act and Rules are satisfied. These records should enable the Assessing Officer to correctly determine the person’s taxable income from the profession. The nature and extent of books to be maintained may depend upon the profession and applicable prescribed requirements. Proper maintenance of records ensures that professional receipts, expenditure, assets and other relevant transactions can be verified while computing profits and gains of profession.

2. Persons Carrying on Business or Non-Specified Profession

A person carrying on a business or profession other than a specified profession is required to maintain books of account where the prescribed income or turnover/gross receipts criteria are satisfied. Such books and documents should be sufficient to enable the Assessing Officer to compute the person’s total income in accordance with the Income-tax Act, 2025. The requirement is intended to ensure proper recording of sales, purchases, receipts, expenses, assets and liabilities relating to the business or profession. The assessee must therefore examine the applicable monetary limits and other conditions before determining whether maintenance of books is compulsory.

3. Persons Covered by Presumptive Taxation Provisions

Persons opting for specified presumptive taxation provisions may be subject to special requirements regarding maintenance of books. Where an assessee declares income in accordance with the applicable presumptive provisions and satisfies their conditions, normal requirements may be modified. However, where the assessee declares income below the prescribed presumptive amount and the statutory conditions requiring maintenance of accounts are fulfilled, books of account and documents may have to be maintained. These provisions ensure that where the taxpayer does not rely on the prescribed presumptive income, adequate accounting records are available to substantiate the actual profit claimed for income-tax purposes.

List of Notified Profession under Section 58:

These professions are particularly relevant for determining the books of account and documents required to be maintained under Section 58 and the applicable rules.

Conditions and Threshold Limits for Maintenance of Books:

1. Specified Professions

Under Section 62(1)(a), every person carrying on a specified profession is required to keep and maintain books of account and other documents as prescribed. Specified professions include legal, medical, engineering, architectural, accountancy, technical consultancy, interior decoration, information technology and company secretary, along with any other profession notified by the Board. The records maintained should be sufficient to enable the Assessing Officer to correctly compute the assessee’s total income. Unlike the general threshold conditions applicable to other businesses and professions, specified professions are separately covered under Section 62(1)(a). The Board may prescribe the books, documents, particulars, manner, place and retention period for such records.

2. Business or Non-Specified Profession – General Limit

Under Section 62(2)(a), a person carrying on business or a non-specified profession must maintain books if income from such activity exceeds ₹1,20,000, or total sales, turnover or gross receipts exceed ₹10 lakh, in any one of the three tax years immediately preceding the relevant tax year. Either of these conditions is sufficient to trigger the requirement. The purpose of maintaining these books and documents is to enable the Assessing Officer to correctly determine the taxpayer’s total income. However, different enhanced monetary limits apply where the taxpayer is an individual or Hindu Undivided Family (HUF) under Section 62(2)(d).

3. Individual or HUF – Higher Threshold

For an individual or Hindu Undivided Family (HUF), Section 62(2)(d) modifies the general monetary limits. Books of account are required where income from business or profession exceeds ₹2,50,000, or total sales, turnover or gross receipts exceed ₹25 lakh, in any one of the three immediately preceding tax years. Therefore, individuals and HUFs enjoy higher threshold limits than other persons covered by the general rule. If either the income limit or turnover/gross-receipts limit is exceeded, the requirement to maintain books becomes applicable. These records should enable the Assessing Officer to properly determine the assessee’s total taxable income under the Act.

4. Newly Set-up Business or Profession

Where a business or profession is newly set up during the tax year, previous years’ figures are naturally unavailable. Under Section 62(2)(b), books must be maintained where the income from business or profession is likely to exceed ₹1,20,000, or total sales, turnover or gross receipts are likely to exceed ₹10 lakh during that tax year. In the case of an individual or HUF, Section 62(2)(d) increases these limits to ₹2,50,000 of income and ₹25 lakh of sales, turnover or gross receipts. Thus, expected income or turnover during the first tax year determines the maintenance requirement for a newly established activity.

5. Lower Income under Presumptive Taxation

Books of account may also become compulsory in certain cases involving presumptive taxation. Under Section 62(2)(c), where an assessee covered by the specified provisions of Section 58(2) or Section 61(2) claims business or professional income lower than the deemed profits prescribed under those provisions, the requirement to maintain books may arise. Section 58 also expressly requires specified assessees declaring profits below the presumptive amount, where the applicable statutory conditions are satisfied, to maintain books under Section 62 and obtain tax audit under Section 63. This ensures that a taxpayer claiming lower actual profits has adequate accounting records to substantiate the income declared.

Threshold Limits at a Glance