Cleaning and Worship of Books of Accounts on Diwali

Introduction
Diwali, the festival of lights, represents more than just the cleaning of homes—it is also a time to organize and refresh financial records. Just as people prepare for the festival by decluttering their spaces, businesses can use this occasion to review their financial books in alignment with legal requirements. The ritual of worshipping accounts during Diwali reflects the importance of maintaining transparent and accurate records, which also aligns with the mandates of the Income Tax Act, GST Act, and Companies Act.

This article explores the legal guidelines for record-keeping under these laws, the consequences of non-compliance, and how such practices align with the essence of Diwali.

Record-Keeping Requirements under Various Laws

1. Income Tax Act: Retaining Records for Six Years

Under the Income Tax Act, businesses and professionals must maintain their financial records for at least six years if specific income thresholds are met:

For businesses: Income exceeding ₹1,20,000 (or ₹2,50,000 for individuals and HUFs) in any of the previous three financial years.
For professionals: If total receipts exceed ₹1,50,000 in any of the past three financial years.
For businesses with presumptive taxation: No books required if income is reported on a presumptive basis under section 44AD or 44AE.

Required records:

Cash books, journals, ledgers
Copies of payment vouchers and receipts

Example:
If XYZ Enterprise Pvt. Ltd. earned income beyond the threshold in FY 2023-24 (AY 2024-25), it must maintain records from FY 2018-19 to FY 2023-24.

2. GST Act: Minimum Six-Year Record Retention

Under GST regulations, every registered taxpayer must retain accurate records of:

Stock of goods, input tax credit (ITC), output tax payable, and inward/outward supplies.

Retention Requirement:

Six years from the last filing date of the annual return (GSTR-9).
If involved in a legal dispute or investigation, the records must be kept until one year after the case is resolved.

Example:
XYZ Enterprises files its GSTR-9 for FY 2023-24 on 31st December 2024. As per GST laws, the company must retain records from FY 2018-19 to FY 2023-24. If involved in a dispute for FY 2021-22, and the matter is resolved on 31st December 2028, records must be kept until 31st December 2029.

3. Companies Act: Retention of Records for Eight Years

The Companies Act mandates that companies retain their financial records for eight years from the end of the relevant financial year.

Example:
If XYZ Enterprises Ltd. closes its financial year on 31st March 2024, the company must keep its records from FY 2015-16 to FY 2023-24.

Consequences of Non-Compliance

Non-compliance with record-keeping requirements can lead to severe penalties:

Income Tax Act:
- Penalty of ₹25,000 for failure to maintain proper records.
- The tax department may also estimate income arbitrarily.
GST Act:
- A fine of ₹10,000 or the amount equivalent to the tax evaded (whichever is higher).
- Beneficiaries of non-compliance may face an additional penalty of ₹25,000.
Companies Act:
- Penalty ranging from ₹50,000 to ₹5,00,000, or imprisonment for up to one year, or both for responsible officials.

The Spirit of Diwali and Financial Discipline

Diwali marks the victory of light over darkness and knowledge over ignorance. In businesses, the ritual of Laxmi Pujan on Diwali involves worshipping not just money but also books of accounts, symbolizing the importance of ethical financial practices.

Diwali coincides with the beginning of the new financial year under the Vikram Samvat calendar, marking a renewal in both personal and professional lives.
Transparent and well-maintained financial records reflect integrity and discipline, which are qualities that align with the blessings of Goddess Laxmi. Businesses that uphold these principles invite prosperity and success.

As the fiscal year runs from April 1 to March 31, the cleaning of financial records during Diwali helps businesses start fresh, ensuring they comply with statutory requirements and remain in good standing with regulatory bodies.

Conclusion

The act of cleaning and organizing financial records during Diwali symbolizes not only compliance with tax laws but also ethical financial conduct. Businesses should take this opportunity to streamline their accounts in accordance with the Income Tax Act, GST Act, and Companies Act, ensuring they meet all legal obligations while inviting prosperity.

This Diwali, let us embrace the deeper significance of the festival by maintaining clean and transparent books of accounts, upholding the spirit of honesty and knowledge, and welcoming Goddess Laxmi’s blessings into our professional lives.

Cleaning and Worship of Books of Accounts on Diwali