Accounting method

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  1. AKD

    AKD Member

    Two methods of accounting, cash and accrual, are relevant to business. An individual is free to adopt any one for his business.
    I would like to know if individual tax payers having no income from business enjoy similar freedom?
     
  2. auditya

    auditya New Member

    dear sir,
    the business income may be tracked by cross verification process, in one way or the other, so they are allowed to maintain books as per their own convenience. And also it was believed that the books of accounts are representing the true and fair view.
    This is absolutely impossible in the case of individual tax payers.
     
  3. auditya

    auditya New Member

    dear sir,
    Anywhere in the world the administration of the tax mechanism will be in favour of the business entities, it may be for one reason or the other.
    so this could be a better option for them in comparison to other tax payers.
     
  4. auditya

    auditya New Member

    Also i just wanted to drag your attention towards several other laws in India, here there are some general laws and specific laws. As there was a saying that specific law overrides the general law , in the same way here the overall tax administration make it difficult to maintain the records under cash system.
     
  5. AKD

    AKD Member

    Why it is not possible to cross verify income of an assessee without any business income but having income only from govt pension and interest from bank/post office?
    It can be verified easily, if necessary. Is it not?
    My purpose of asking this question is to know if such a tax payer has got advantage of cash accounting method or not.
    If yes, he can defer paying tax on accrued bank interest(not actually paid)until maturity.
     
    auditya likes this.
  6. auditya

    auditya New Member

    dear sir,
    I appreciate the query made by you.
    It is possible to cross verify the same with the TDS as deducted from the source.
    Further the assessee being an individual earning income from a source other than business , he can't escape the tax laws very easily, as did by the business /profession.
    Hence there is no requirement to maintain the books of accounts which are meant for the purpose of checking the accuracy of the transactions made by the entity.
    Finally, i'll clarify one thing that a person may involve in any business activity with a lot of transactions , but he can't do the same in the case of employment or some other.
    So, it is easy to check his tax compliance. Therefore, there is no obligation to maintain books of accounts. Hence , there is no concept of maintenance of books of accounts by the individuals who earn income from a source other than business income.
     
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