27 Oct

5 Important questions of Cleansing and Maintenance of Books of Accounts on the occasion of Diwali

!! 5 Important questions of Cleansing & Maintenance of Books of Accounts on the occasion of Diwali !!

The festival of Diwali is coming; Housewives (Gruhlaxmi’s) are busy cleaning and decorating our homes. Consequently, what ought to be done of previous records of Books of accounts under various Acts, in order that cleansing business places w.r.t. of previous books of accounts are often done.

On Diwali, we should always get rid of old things and welcome new things. God Laxmi is very happy with the cleanliness and believed to remain longer. Whereas doing business, several tax laws are to be taken care of by the businessmen. Books to be maintained, retention period and compulsion needs are different under all the different laws i.e. Income Tax law, GST Law, and also the Company Laws. Let’s have a glance at it.

1. What are the provisions under the Income Tax Act for maintaining books of accounts?

Answer:- As per Income Tax, books of accounts like cashbook, Journal, ledgers, etc. ought to be maintained for a period of six years (6 years) from the end of relevant A.Y.;

·        For mere professions like Doctors, CA’s, etc., whose gross receipts in the profession exceed Rs. 1, 50,000 in all the 3 years immediately preceding the previous years.

·        If the sale/turnover/gross receipts from the business or non-specified profession is more than Rs. 10,00,000 (Rs. 25,00,000 for Individuals & HUF) or, the income from business or profession is more than Rs. 2,50,000 (Rs. 1,20,000 for Individuals & HUF) in any of the three preceding years.

Further, books of accounts don’t seem to be needed to be maintained, if the person has shown income on presumptive basis u/s 44 AD @ 8% of turnover or u/s 44AE having transportation business. However, if the assessment in relation to any AY has been reopened under section 147, all the books of accounts that were unbroken and maintained at the time of reopening of assessment are to be maintained until such assessment is completed.

For example, For AY 2021-22 (FY 2020-21) Books of accounts of the past 6(Six) years is to be preserved i.e. till AY 16-17 (FY 2015-16). The records for previous years to identical are often discarded this Diwali.

2. How long ought to books of accounts be maintained under GST Law?

Answer: - as per section 36 of the CGST Act, 2017, each registered person has got to maintain GST records at the principal place of business for the period not less than a period of 6 years from the last date of filing of the annual return for that year. In case any proceeding is going on the business entity, books of accounts may be preserved until such proceeding is closed.

3. How long ought to corporations (Pvt Ltd Company) maintain books of accounts under the Companies Act?

Answer: - each company ought to maintain books of accounts for 8 financial years from the end of the relevant year. On condition that, wherever an investigation has been ordered in respect of the corporate, the Central Government might direct that the books of accounts could also be unbroken for an extended period as it may deem fit.

4. What regarding the books of accounts maintained in Personal computer software? 

Answer: - If books of accounts are maintained in Personal computer software, print out of the same need to be maintained. As per the Income Tax Act, the information keeps on a PC or pen drive or CD, etc. is taken into account to be books of accounts. In short, the law even acknowledges the records in electronic kind as books of accounts. One should additionally watch out to confirm the protection of information keep. Therefore perpetually check the saved information often on external devices. In earlier days, changes were tough as books of accounts were maintained manually. But currently, the processed information is straightforward to alter, therefore watch out for it.

5. What’s the importance of books of accounts on the occasion of Diwali, and what one ought to learn from this?

Answer: - each year on Diwali, people worship money on "Dhanteras," & books of accounts on "Laxmipujan". As per Financial Laws, the new financial year starts from 1st Apr and ends on 31st March, and books are maintained consequently. Businessmen are taxpayers, and so, they need to take the oath on Diwali to stay their transactions properly recorded for statutory compliances. This may guarantee less muddle, still as ease the method of computation of tax liabilities, and hence, can save the taxpayers from obtaining burns from firecrackers (notices, assessments, etc.) that the tax department might crack.


Santosh Patil

Founder & CEO

Alliance Tax Expert's




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