Maintenance of Books of Account: When It Is Mandatory (Income Tax Act 2025)

Under section 62 of the Income-tax Act, 2025, every person carrying on a specified profession must keep books of account. A business, or any other profession, must keep them once it crosses Rs 1,20,000 of income or Rs 10 lakh of turnover in any one of the three preceding tax years. For an individual or HUF the limits are modified to Rs 2,50,000 of income and Rs 25 lakh of turnover. Rule 46 of the Income-tax Rules, 2026 says what to keep, where, and for how long.

Below, the tests are laid out in order, followed by worked examples and the records a professional must hold. Every figure comes from section 62 (as amended by the Finance Act, 2026) and rule 46, and the section or rule number sits next to it. Last reviewed against that text on 10 November 2026.

Who must maintain books of account under section 62?

Section 62(1) names two groups:

• Clause (a): any person carrying on a specified profession. No income or turnover test is written into the section for this group.
• Clause (b): any person carrying on a business, or a profession that is not a specified profession, who satisfies a condition in section 62(2).

Both groups must keep such books of account and other documents as will let the Assessing Officer compute total income under the Act.

Which professions are "specified professions"?

Section 62(4) defines "specified profession" as legal, medical, engineering, architectural, accountancy, technical consultancy, interior decoration, information technology or company secretary, plus any other profession the Board notifies.

Rule 46(2) sets out the detailed record-keeping for a slightly different list: legal, medical, engineering, architectural, accountancy, technical consultancy, interior decoration, authorised representative and film artist. The two lists are not identical, so for a profession on only one of them, read both provisions together.

What are the income and turnover limits for a business?

Test (section 62(2))	Persons other than individual / HUF	Individual or HUF (clause (d))
Existing business or profession, clause (a): in any one of the three immediately preceding tax years	Income exceeds Rs 1,20,000, or turnover / gross receipts exceed Rs 10 lakh	Income exceeds Rs 2,50,000 and turnover / gross receipts exceed Rs 25 lakh
Newly set up in the tax year, clause (b)	Income is likely to exceed Rs 1,20,000, or turnover is likely to exceed Rs 10 lakh, during the year	Likely to exceed Rs 2,50,000 and Rs 25 lakh
Lower profit than presumptive, clause (c)	The assessee under section 58(2) or 61(2) (Table Sl. Nos. 4 and 5) claims income lower than the deemed profit

One point of reading. Clause (d) says that for an individual or HUF, clauses (a) and (b) are modified to income exceeding Rs 2,50,000 and turnover exceeding Rs 25 lakh. The word is "and", so as written both limits are named together. If an individual is near these limits, confirm how the clause is applied before relying on a single limit.

How do I check whether my business needs books? A decision path

Worked example 1: does a trader with Rs 18 lakh turnover need books? (tax year 2026-27)

Assumptions: Ravi is an individual running a small retail shop, not a specified profession, not newly set up, and he has not claimed income lower than a presumptive amount.

Preceding year	Turnover	Income	Above Rs 2,50,000 income and Rs 25 lakh turnover?
Year 1	Rs 16,00,000	Rs 1,90,000	No
Year 2	Rs 17,50,000	Rs 2,10,000	No
Year 3	Rs 18,00,000	Rs 2,20,000	No

Result: neither limit in section 62(2)(d) is crossed in any of the three years, so section 62(2)(a) does not make books mandatory. Ravi should still keep records, because he must be able to support his return.

Worked example 2: a partnership firm with Rs 12 lakh turnover

Assumptions: a firm (not an individual or HUF) earned income of Rs 80,000 and turnover of Rs 12,00,000 in one of the last three years.

1. Income test, Rs 1,20,000: Rs 80,000 does not exceed it.
2. Turnover test, Rs 10 lakh: Rs 12,00,000 exceeds it by Rs 2,00,000.
3. Section 62(2)(a) uses "or", and clause (d) does not apply to a firm. One limit crossed in one of the three years is enough.

Result: books of account are mandatory for the firm, even though income was below Rs 1,20,000.

Real-life example: Meena the consultant

Meena starts as an interior decorator in April 2026. Interior decoration is a specified profession under section 62(4)(a), so section 62(1)(a) applies from her first year. There is no waiting for income to cross a limit. Rule 46(3) does remove the rule 46(2) duties where her gross receipts for the year are not likely to exceed Rs 1,50,000 (newly set up) or did not exceed that in any of the three preceding years. If she expects more, she needs the records listed in rule 46(4) from day one.

Real-life example: Ravi after one good year

Take Ravi from example 1. In the next tax year his turnover jumps to Rs 31 lakh and income to Rs 3,40,000. Both individual limits are now crossed. From the following tax year, that year sits within "any one of the three years immediately preceding", so he must keep books, and the year stays in the look-back window for three tax years.

What books must a professional keep? (rule 46)

Rule 46(4) lists the records for the professions in rule 46(2):

• a cash book, a journal (if the mercantile system is followed) and a ledger;
• copies of bills or receipts issued, for sums of Rs 250 or more;
• original bills and receipts for expenditure of Rs 250 or more;
• payment vouchers signed by the person, for expenditure up to Rs 250 where the cash book lacks adequate particulars.

A medical professional must also keep a daily case register in Form No. 25 and an inventory, as on the first and last day of the tax year, of drugs, medicines and consumables used (rule 46(6)). Everyone else covered by section 62(1)(b) must keep books that let the Assessing Officer compute total income (rule 46(1)).

Where and for how long must books be kept?

Question	Answer	Source
Where	At the place of the profession; the principal place if there are several; or at each place if separate books are kept there	Rule 46(7)
Electronic books	Accessible in India at all times; daily back-up on servers physically located in India	Rule 46(8)
Retention period	Seven tax years from the end of the relevant tax year	Rule 46(9)
If assessment is reopened	Keep all books held at the time of reopening until the reopened assessment is completed	Rule 46(10)

What is the penalty for not keeping books of account?

Section 441 allows a penalty of Rs 25,000 if a person fails to keep and maintain books of account and other documents as required by section 62 or the rules, for any tax year, or fails to retain them for the period fixed in the rules (seven tax years under rule 46(9)). The Assessing Officer, the Joint Commissioner (Appeals) or the Commissioner (Appeals) can impose it. The word is "may", so it is a power, not an automatic charge.

Rule 46(5) also defines the cash book: a day-to-day record of all cash receipts and payments that shows the cash balance in hand at the end of each day, or at the end of a period not longer than a month.

What are the common mistakes?

• Testing only the current year. The test looks at any one of the three preceding tax years, not just the last one.
• Applying the individual limits to a firm or company. Clause (d) is only for an individual or HUF.
• Assuming a profession needs a turnover test. A specified profession falls under section 62(1)(a) directly; rule 46(3) only relaxes the detailed rule 46(2) list for small receipts.
• Forgetting the presumptive trigger. Claiming income below the deemed profit under section 58(2) or 61(2) brings books under section 62(2)(c). Section 58(3) also ties this to total income above the basic exemption limit and a tax audit under section 63. See our guide to presumptive taxation and tax audit limits.
• Keeping electronic backups abroad. Rule 46(8) requires India-located servers for the daily back-up.
• Discarding records early. Seven tax years is the minimum, and longer if an assessment has been reopened.

Quick reference

Item	Limit or period
General limit (non-individual)	Income above Rs 1,20,000 or turnover above Rs 10 lakh
Individual / HUF	Income above Rs 2,50,000 and turnover above Rs 25 lakh
Look-back window	Any one of the three preceding tax years
Professional small-receipts relief (rule 46(3))	Gross receipts not above Rs 1,50,000
Bill / receipt threshold (rule 46(4))	Rs 250
Retention	Seven tax years
Penalty for not keeping or retaining books (section 441)	Rs 25,000

How do CA firms track which clients must keep books?

For a practice, the work is remembering which clients crossed a limit in any of the last three years, and which professionals need a case register or voucher trail. Finexo's practice management software keeps client records, document requests and deadlines in one place, so the review does not live in a spreadsheet. It does not decide the legal position for you.

Where is this in the Act?

• Section 62(1): who must keep books
• Section 62(2): income and turnover conditions, including clause (d) for individuals and HUFs
• Section 62(3): the Board's power to prescribe books, particulars, place and period
• Section 62(4): meaning of "specified profession"
• Sections 58 and 61: presumptive schemes linked by clause (c)
• Rule 46: books, place, electronic records, retention
• Section 441: penalty for failing to keep, maintain or retain books

This article explains the Income-tax Act, 2025 (as amended by the Finance Act, 2026) and the Income-tax Rules, 2026. It is general information, not tax advice. Confirm the position for a specific case with a qualified chartered accountant.