The Income Tax Act prescribes who must maintain books, what books to maintain, and how long to keep them. The rules differ for specified professions versus other businesses and professions.
## (1) Specified Professions
"Specified professions" include legal, medical, engineering, architectural, accountancy, technical consultancy, interior decoration, etc.
Condition
Books Required
Gross receipts exceed ₹1,50,000 in all 3 preceding P.Y.s (or likely to exceed in current P.Y. for a new business)
Prescribed books: Cash Book, Journal, Ledger, Carbon copies of bills > ₹25, Daily case register & stock register (medical only)
Other case
Maintain such books as would enable the AO to compute total income
## (2) Other Business / Profession
The thresholds depend on whether the assessee is Individual/HUF or Other Persons (firms, companies, etc.).
Assessee
Books Required if (in any 1 of 3 preceding P.Y.s)
Individual / HUF
Turnover > ₹25 lacs OR PGBP income > ₹2.5 lacs
Other Persons
Turnover > ₹10 lacs OR PGBP income > ₹1.2 lacs
If the thresholds are crossed, books "such as would enable the AO to compute total income" must be maintained.
## (3) Retention Period
Minimum 6 years from the end of the relevant Assessment Year.
## Quick Decision Tree
1. Is the assessee in a specified profession? → Apply the ₹1,50,000 test.
2. Otherwise → Apply the turnover/income test, using the correct slab (Individual/HUF vs Other).
3. Either way → Keep books for at least 6 years from end of A.Y.
Worked example
### Example 1
Example 1 — Specified profession: Dr. Mehta, a doctor, had gross receipts of ₹1,80,000, ₹2,00,000 and ₹1,75,000 in the three preceding previous years. Since receipts exceed ₹1,50,000 in all 3 P.Y.s, he must maintain prescribed books — Cash Book, Journal, Ledger, carbon copies of bills above ₹25, and (being in medical) the daily case register and stock register.
### Example 2
Example 2 — Other business, Individual: Mr. Rajan runs a textile shop. In the past 3 years his turnover was ₹22 lacs, ₹26 lacs and ₹24 lacs; PGBP income was ₹2 lacs each year. Since turnover exceeded ₹25 lacs in at least one of the preceding 3 P.Y.s, he must maintain books enabling the AO to compute his total income.
### Example 3
Example 3 — Other business, Firm: A partnership firm's turnover in the last 3 P.Y.s was ₹9 lacs, ₹11 lacs, ₹8 lacs. Since turnover exceeded ₹10 lacs in one of the three years, books must be maintained (the threshold for "Other Persons" is ₹10 lacs / ₹1.2 lacs PGBP).
⚠️ Common exam mistakes
Applying the ₹25 lacs / ₹2.5 lacs limit to a firm or company — these limits apply ONLY to Individual/HUF. For Other Persons, the limits are ₹10 lacs / ₹1.2 lacs.
For specified professions, requiring the ₹1,50,000 limit to be crossed in any one year. It must be crossed in all 3 preceding previous years.
Forgetting that the daily case register and stock register are required ONLY for medical professionals, not all specified professions.
Maintaining books for only 6 years from year of transaction — the period is 6 years from end of the relevant Assessment Year.
Ignoring the "likely to exceed" test for new businesses in their first year.
Bare-Act text Section 44AA · Income Tax Act, 1961 · click to expand
Section 44AA requires every person carrying on legal, medical, engineering, architectural, accountancy, technical consultancy or interior decoration or any other notified profession to keep and maintain such books of account and other documents as may enable the Assessing Officer to compute his total income. Where gross receipts exceed ₹1,50,000 in all the three years immediately preceding the previous year (or are likely to exceed for a new business), prescribed books must be kept. For other businesses/professions, books must be maintained where income from business/profession exceeds ₹1,20,000 (₹2,50,000 for individuals/HUF) or total sales/turnover/gross receipts exceed ₹10,00,000 (₹25,00,000 for individuals/HUF) in any one of the three preceding previous years.