Section 62 of the Income Tax Act, 2025 mandates the maintenance of books of account for persons carrying on specified professions. However, there is an exemption for professionals whose gross receipts do not exceed the prescribed threshold. Understanding this threshold is essential for professionals to determine their compliance obligations.
The ₹1,50,000 Threshold
The Rule
The provisions requiring maintenance of books of account for specified professions shall not apply:
- In relation to any tax year in the case of any person, if his total gross receipts in the profession do not exceed Rs. 1,50,000 in any one of the three years immediately preceding the tax year
- Where the profession has been newly set up in the tax year, his total gross receipts in the profession for that year are not likely to exceed the said amount
Rationale
The threshold is designed to exempt small professional practices from the compliance burden of maintaining detailed books of account. Professionals with modest gross receipts are not required to maintain the prescribed books of account.
Applicability
Specified Professions Covered
The threshold applies to specified professions including:
- Legal profession
- Medical profession
- Engineering profession
- Architectural profession
- Accountancy profession
- Technical consultancy
- Interior decoration
- Information technology
- Company secretary
- Authorised representative
- Film artist
- Any other profession notified by the Board
Other Professions
For professions not specified, different thresholds apply under Section 62(2):
- Income exceeds Rs. 1,20,000
- Total sales, turnover or gross receipts exceeds Rs. 10,00,000
What Constitutes Gross Receipts
Inclusion
Gross receipts include:
- Fees received for professional services
- Income from profession
- Any other receipts from professional activity
Exclusion
Gross receipts do not include:
- Income from other sources
- Capital gains
- Income from house property
Books of Account Required
If the threshold is exceeded, the professional must maintain:
Cash Book
A record of all cash receipts and payments, kept day-to-day and giving the cash balance in hand at the end of each day or at the end of a specified period not exceeding a month
Journal
If accounts are maintained according to the mercantile system of accounting
Ledger
A ledger
Bills/Receipts
For sums equal to or exceeding Rs. 250, copies of bills or receipts issued
Original Bills/Receipts
For expenditure equal to or exceeding Rs. 250, original bills and receipts
Payment Vouchers
For expenditure not exceeding Rs. 250, payment vouchers prepared and signed
Consequences of Non-Compliance
Penalty
Failure to maintain books of account may attract penalty under the Act.
Disallowance of Expenditure
Failure to maintain proper books may result in disallowance of expenditure.
Best Judgment Assessment
In the absence of proper books, the Assessing Officer may make a best judgment assessment.
Expert Legal Guidance
Understanding the gross receipts threshold for mandatory books of account is essential for professionals. Anuj Desai & Associates provides expert advisory services on Direct Tax Code compliance, helping professionals determine their compliance obligations and maintain proper books of account.