It is advisable that Medical Professionals should account for transactions on cash basis (and not on mercantile basis), and maintaining of books will aid in getting deduction for the expenses actually incurred for the purposes of the profession irrespective of its quantum.

General transactions of a Medical Professional:

Income of a medical professional is taxable under the head “Profit and Gains from Business & Profession (PGBP)”. Moreover honorarium received by visiting doctors cannot be treated as profit in lieu of salary and therefore it is taxable under PGBP.

• Incomes can be in the form of professional fees, dividends from shares, interest from Bank, Fixed Deposits, Debentures, Government Securities etc.
• Expenditures can be in the form of payments of salaries, rent, medicine, electricity, Medical & other Equipments, Furniture, Fixtures, phone, stationary etc.
• Certain transactions which only affects the net worth of the business e.g. taking a loan from the bank, LIC etc, repayment of a loan, purchase of an asset like car, premises etc.

Provisions governing the Maintenance of books under 44AA:

All Medical Professionals are compulsorily required to maintain books of accounts if his total gross receipts in the profession exceed Rs.150000 in any of the three years immediately preceeding the previous year. But in case the Gross Receipts in the profession do not exceed the prescribed limit, (or where the profession has been newly setup in the previous year, his Gross total receipts in the profession for that year are not likely to exceed the said amount) then they are not compulsorily required to maintain books of accounts as per section 44AA.

Books to be Maintained:

Rule 6F contemplates maintenance of the following books and documents:

• a Cash Book;
• a Journal, if the accounts are maintained as per mercantile system of accounting;
• a ledger;
• carbon copies of bills and they should be serially numbered and carbon copies or counterfoils of receipts issued in respect of sums exceeding Rs.25/-,
• original bills for expenses exceeding Rs.50 and payment vouchers for petty expenses like salaries, miscellaneous etc. But in a case where the cash book maintained by the person contains adequate particulars in respect of the expenditure incurred by him, then vouchers are not necessary in respect of expenses upto Rs.50.
• a daily case register in the prescribed Performa (Form No. 3C).

FORM No. 3C

Form of Daily Case Register

• an inventory under broad heads, with clear segregations, as on the first and the last day of the previous year, of the stock of drugs, medicines and other consumables accessories used for the purpose of the profession.

Penalty for Non – Compliance

Failure to maintain books of accounts and other documents or to retain them as required u/s 44AA attracts penalty of Rs. 25,000 u/s 271A.

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