Know who must maintain books & get tax audit done

As the income tax return filing period for Assessment Year (AY) 2026-27 approaches, taxpayers need to look beyond timely submission.

Maintaining proper financial records and meeting audit requirements are equally important for eligible businesses and professionals.

While most salaried taxpayers are not required to maintain detailed books of accounts, certain businesses and professionals must follow accounting rules under the Income Tax Act.

Additionally, some taxpayers need to complete a tax audit before filing their returns.

Who Must Maintain Books of Accounts?

The Income Tax Act requires specific taxpayers to maintain books so that the tax authorities can accurately determine taxable income.

For notified professionals, maintaining books becomes mandatory when gross receipts cross ₹1.5 lakh in any of the three immediately preceding financial years.

For newly established professions, the rule applies when expected receipts exceed this limit during the year.

The notified professions include legal services, medical practice, engineering, architecture, accountancy, technical consultancy, interior decoration, authorised representation, film-related professions, company secretarial services, and information technology services.

Such professionals must preserve records like cash books, journals, ledgers, bills, vouchers, and other required documents.

Rules for Other Professionals and Businesses

• Professionals outside the notified category must maintain books if their income exceeds ₹2.5 lakh or their gross receipts cross ₹25 lakh in any one of the previous three years.
• Similarly, businesses are required to maintain accounts if their income exceeds ₹2.5 lakh or their sales, turnover, or gross receipts exceed ₹25 lakh in any one of the previous three years.
• For newly started businesses or professions, these conditions apply if the taxpayer expects to cross the prescribed limits during the financial year.

Who Needs a Tax Audit?

Maintaining books and completing a tax audit are separate requirements. Under Section 44AB of the Income Tax Act, certain taxpayers must get their accounts audited and submit the audit report electronically.

For businesses, an audit is generally required when turnover exceeds ₹1 crore in a financial year.

However, the limit increases to ₹10 crore if cash receipts and cash payments remain within 5% of total transactions.

For professionals, a tax audit becomes compulsory when gross receipts exceed ₹50 lakh during the financial year.

Presumptive Taxation Rules

Taxpayers using presumptive taxation schemes under Sections 44AD, 44ADA, and 44AE usually receive simpler compliance benefits.

However, an audit may still become necessary if declared income is lower than the prescribed limit and total income exceeds the basic exemption threshold.

Failing to maintain required records or complete an applicable audit can lead to penalties under tax laws.

It may also create challenges during assessments if authorities require supporting financial documents.

Therefore, eligible taxpayers should verify their compliance obligations before filing their ITR for AY 2026-27.

Image from Pxhere (Free for commercial use / CC0 Public Domain)

Image published on April 06, 2017

Image Reference: https://pxhere.com/en/photo/1372511