Income Tax Rules 2026 | Master Guide with Rule-wise Commentary

The Income Tax Rules 2026 provide the procedural framework for implementing the provisions of the Income-tax Act and play a crucial role in ensuring tax compliance in India. Given the extensive amendments and evolving regulatory landscape, understanding these rules has become essential for tax professionals, businesses, and taxpayers alike. The Master Guide to Income Tax Rules 2026 offers a comprehensive rule-wise commentary, combining statutory provisions, practical insights, judicial interpretations, and expert analysis.

Table Of Content

1. 1. Statutory background
   2. Keeping and maintaining books of account [Rule 46(1) to (3)]
   3. Place where books of account and other documents to be kept and maintained [Rule 46(7)]
   4. Electronic maintenance of books of account and other documents [Rule 46(8)]
   5. Period for which books of account and other documents to be kept and maintained [Rule 46(9) & (10)]
   6. Penal consequences
   7. Summarised table for compulsory maintenance of books of account and other documents

1. Statutory background

Section 62(1)(a) r/w section 62(4) mandates that any person carrying on any of the following professions (known as ‘specified professions’) shall keep and maintain such books of account and other documents to enable the AO to compute his total income under the 2025 Act:—

(1) Legal profession.
(2) Medical profession.
(3) Engineering profession.
(4) Architectural profession.
(5) Profession of accountancy.
(6) Profession of technical consultancy.
(7) Profession of interior decoration.
(8) Profession of ‘Company Secretary (CS)’ [i.e., a person who is a member of the Institute of Company Secretaries of India in practice within the meaning of section 2(2) of the Company Secretaries Act, 1980].
(9) Profession of information technology.
(10) Profession of authorized representative—Notification No. SO 17(E), dated 12-1-1977. 2‘Authorized representative’ means a person who represents any other person, on payment of any fee or remuneration before any Tribunal or authority constituted or appointed by or under any law for the time being in force, but does not include an employee of the person so represented or a person carrying on legal profession or a person carrying on the profession of accountancy.

(11) Profession of film artist—Notification No. SO 17(E), dated 12-1-1977.

3‘Film artist’ means any person engaged in his professional capacity in the production of a cinematograph film, whether produced by him or by any other person, as an/a—

(i) Actor;
(ii) Cameraman;
(iii) Director (including assistant director);
(iv) Music director (including assistant music director);
(v) Art director (including assistant art director);
(vi) Dance director (including assistant dance director);
(vii) Editor;
(viii) Singer;
(ix) Lyricist;
(x) Story writer;
(xi) Screen-play writer;
(xii) Dialogue writer; and
(xiii) Dress designer.

Section 62(1)(b) further mandates that any person carrying on business, or any profession (not being one of the ‘specified professions’ referred to in section 62(1)(a) above) and satisfying certain conditions specified in section 62(2) shall keep and maintain such books of account and other documents to enable the AO to compute his total income under the 2025 Act.

As per section 62(3), the CBDT may, prescribe, by rules,—

(a) the books of account and other documents (including inventories, wherever necessary) to be kept and maintained (see para 46.3);
(b) the particulars to be contained therein (see para 46.3);
(c) the form, manner and place at which they shall be kept and maintained (see paras 46.4 and 46.5); and
(d) the period for which such books of account and other documents are to be retained (see para 46.6).

Thus, for the above purposes, rule 46 (see paras 46.2 to 46.6) is relevant.

46.1-1 Constitutional validity – In H. A. K. Rao v. UOI [1992] 61 Taxman 61 (Kar.), it has been held that no discrimination has been made for maintaining books of account for professions under this section so as to make section violative of Article 14 of the Constitution.

46.1-2 Artist/entertainer, when can and when cannot be treated as ‘film artist’ – An artist/entertainer can be called a film artist, if he renders his/her services pursuant to production of film. However, an artist/entertainer will not be film artist if he entertains people not involved in production of film—Jasminder Singh v. Addl. CIT [2017] 83 taxmann.com 239 (Lucknow – Trib.).

46.1-3 Stunt artist is not an ‘actor’ – Since stunt artist is neither included in rule 6F of the 1962 Rules [corresponding to, nor in notification made for purposes of section 44AA, it cannot be said that stunt actor is an actor within meaning of rule 6F—DCIT v. Movies Stunt Artists Association [2006] 6 SOT 204 (Mum. – Trib.).

2. Keeping and maintaining books of account [Rule 46(1) to (3)]

46.2 Rule 46(1) again reiterates what is mentioned in section 62(1)(b). It states that every person required to keep and maintain books of account and other documents u/s 62(1)(b) shall maintain such books of account and other documents that enable the Assessing Officer to compute his total income under the 2025 Act.

Further, rule 46(2)4 mandates that every person carrying on the specified professions referred to in section 62(1)(a) shall keep and maintain the books of account and other documents specified in rule 46(4).

However, rule 46(3) carves out that the above specified professionals shall be required to keep and maintain the books of account and other documents only if—

(a) In case of existing profession—his total gross receipts in the profession exceed Rs. 1,50,000 in all the 3 years immediately preceding the tax year; or
(b) In case of newly set up profession in the tax year—his total gross receipts in the profession for that year are likely to exceed Rs. 1,50,000.

Therefore, such specified professionals are not required to keep and maintain books of account if their total gross receipts do not exceed Rs. 1,50,000 in any one of the 3 years immediately preceding the tax year, or where the profession has been newly set up in the tax year, his total gross receipts for that year are not likely to exceed the said amount of Rs. 1,50,000.

46.2-1 Interpretation of rule 46(3) – A plain reading of the proviso to rule 6F(1) of the 1962 Rules [corresponding to rule 46(3) of the 2026 Rules] is that a person is not required to maintain books of account if the total gross receipts from the profession did not exceed Rs. 60,000 (now, Rs. 1,50,000) in any one of the 3 years immediately preceding the previous year and not vice versa. The rule would have read otherwise had that been the intention. The rule then would have been that if the income exceeds Rs. 60,000 (now, Rs. 1,50,000) in any one of the 3 years immediately preceding the previous year, then the assessee would be required to maintain the books of account. The proviso provides to the contrary and states that nothing in sub-rule (1) would apply if the income does not exceed Rs. 60,000 (now, Rs. 1,50,000) in any one of the 3 years immediately preceding the previous year. The Single Judge had taken the view that the contemplation of the rule was that gross receipt of Rs. 60,000 (now, Rs. 1,50,000) should not exceed in any one of the 3 years preceding the previous year to claim exemption from maintaining the books of account; whereas the contemplation of the rule was that a person is exempted from the operation of sub-rule (1) if his total gross receipt of income does not exceed Rs. 60,000 in any one of the 3 years preceding the previous years. If the gross receipts do not exceed Rs. 60,000 (now, Rs. 1,50,000) in any one of the three years immediately preceding the previous year, then he is not required to maintain the books of account—A. Keshava Bhat v. ITO [2001] 115 Taxman 208 (Kar.).

46.3 Prescribed books of account and other documents to be compulsorily kept and maintained by specified professional [Rule 46(4) to (6)]

46.3-1 Prescribed books of account and other documents in case of every specified professional [Rule 46(4) & (5)(b)] – The following are the compulsory books of account and other documents which shall be required to be kept and maintained by all the specified professionals referred to in section 62(1)(a) r/w rule 46(2) & (3):—

(i) Cash book – It means a record of all cash receipts and payments, kept and maintained from day-to-day and giving the cash balance in hand at the end of each day or at the end of a specified period not exceeding a month. Thus, a cash book, as the very name implies, is a record of all cash transactions, both incomings and outgoings, recorded in chronological order on a day-to-day basis.
(ii) Journal – A ‘journal’ is compulsorily to be maintained only if the accounts are maintained according to the mercantile system of accounting. The necessity for maintaining a journal can arise mostly to effect adjusting entries in respect of transactions not involving cash inflow or outflow, and hence, the person will not find it necessary to maintain a journal, especially when he maintains his accounts under the cash system.
(iii) Ledger – A ‘ledger’ is the primary document which is quite essential for preparing the tax return. It classifies and summarises all the transactions into different groups according to their nature. The ledger is written up with reference to the entries in the cash book, and it provides at one place all the transactions relating to a particular item (like ‘salaries’, ‘rent’, etc.) as well as the aggregate receipt/expenditure for the year, so that it becomes easy to prepare the income and expenditure statement as well as the tax return.
(iv) Copies of bills/receipts – Copies of bills or receipts issued by him for sums of Rs. 250 or more.
(v) Original bills and receipts – Original bills and receipts in respect of expenditure of Rs. 250 or more incurred by the person and issued to him.
(vi) Payment vouchers – Where the expenditure incurred does not exceed Rs. 250, and the cash book maintained by the person does not contain adequate particulars in respect of such expenditure, payment vouchers prepared and signed by the person shall be kept and maintained.

46.3-2 Additional books of account and other documents prescribed in case of person carrying on medical profession [Rule 46(6)] – The following are the additional compulsory books of account and other documents which shall be required to be kept and maintained by every person carrying on medical profession:—

(i) Daily case register – This record is maintained in Form No. 255. To make the position clear, the Form itself stipulates that this register must be maintained by ‘practitioners of any system of medicine, i.e., physicians, surgeons, dentists, pathologists, radiologists, vaids, hakims, etc.’ This is an important record in which complete details of all the patients treated by the medical professional are required to be recorded chronologically on a day-to-day basis, so that the total professional receipt during the year could be easily and accurately ascertained. The following particulars are required to be furnished in this register:—

(1) Date of treatment/visit;
(2) Patient’s name;
(3) Nature of professional services rendered, i.e., general consultation, surgery, injection, visit, etc.
(4) Fees received;
(5) Date of receipt.

(ii) Stock inventory – An inventory of the stock of drugs, medicines and other consumable accessories used for the purpose of medical profession is also required to be maintained by every such person. An inventory is just an itemised record of items, indicating the name of the item and the quantity in stock on specified dates. This inventory is required to be kept under broad heads only. Thus, where drugs and medicines are kept in stock, there is no necessity to keep an inventory of each and every drug and medicine. All items falling under ‘drugs and medicines’ can be indicated under one head. In respect of other items, the inventory is required to be in respect of ‘consumable accessories’ like syringes, needles, bandage materials, etc. The inventory for tax purposes is required only in respect of two dates in the year, viz., the first day of the tax year (1st April) and the last day of the tax year (31st March). The obvious purpose for which such an inventory is required to be maintained is to ensure that the purchases and issues are properly accounted for. It must also be noted that the inventory is primarily a ‘quantity’ account, and not an account which must necessarily indicate the ‘value’ of the items also. It will enable the AO to satisfy himself that—

Quantity as on 31st March = Quantity as on 1st April + Purchases made from 1st April to 31st March – Consumption from 1st April to 31st March.

46.3.2-1 RULE 46(6) DOES NOT APPLY IN CASE OF COMPANIES – For a person to be engaged in a profession, personal skill is necessary. A company, being an artificial person, cannot be said to possess any personal skills. A company, being an artificial person, does not have a mind or a body and, therefore, cannot be engaged in any profession. It can neither have an intellectual skill or any manual skill. Even taking a broader and a more comprehensive meaning of the term ‘profession’, one cannot extend the same to the case of an incorporated company as being capable of carrying of a profession. The skill involved in carrying out professional activity is predominantly mental or intellectual rather than physical or manual. Therefore, the requirement of this Rule cannot apply to a person which is an incorporated company—ITO v. Ashalok Nursing Home (P.) Ltd. [2006] 156 Taxman 86 (Mag.) (Del.).

46.3-3 Maintenance of books, etc., are not subject to valuation report of technically qualified persons – In Smt. Kiran Lata v. ITAT [2009] 177 Taxman 420 (Uttarakhand), it was held that it is true that section 44AA of the 1961 Act [corresponding to section 62 of the 2025 Act] nowhere provides that books of account maintained by medical professionals and other professionals, must be based on valuation report of technically qualified persons. However, that does not mean that whatever has been shown by the assessee must be taken as a gospel truth. In the said case in her return of income for the relevant assessment year, the assessee, a medical professional, had shown an investment of Rs. 26.99 lakhs on a newly constructed building which was being used for her professional activities. The assessee had maintained books of account u/s 44AA of the 1961 Act [corresponding to section 62 of the 2025 Act]. The AO found that the claim of investment was not supported with sufficient proof and, therefore, he got the value of the building assessed by the DVO. The valuation report showed that the value of the building was much more than shown by the assessee. The AO treated the amount of difference between the value assessed by the DVO and the value shown by the assessee as an additional investment from undisclosed sources u/s 69 of the 1961 Act [corresponding to section 103 of the 2025 Act] and made addition accordingly. The Court held that once the fact that low investment was shown by the assessee had come to the knowledge of the AO, whether it came through the assessee’s admission on oath or otherwise, satisfaction of the AO to invite the DVO could not be said to be illegal or unjust.

46.3-4 No requirement to maintain records over and above specified in Rule 46(4) & (6) – Once the CBDT, vide rule 6F of the 1962 Rules [corresponding to section 46 of the 2026 Rules], in respect of particular nature of profession has prescribed maintenance of certain books of account, then it is not open to assessing authority to desire some other books of account to be maintained over and above the books of account required by rule 6F of the 1962 Rules [corresponding to section 46 of the 2026 Rules]. Any view to the contrary will defeat the very purpose of introducing section 44AA of the 1961 Act [corresponding to section 62 of the 2025 Act] and rule 6F of the 1962 Rules [corresponding to section 46 of the 2026 Rules]—CIT v. Rajni Kant Dave [2006] 150 Taxman 387/281 ITR 6 (All.).

46.3-5 Bank statement – Mere bank statement which is issued by bank to its client/account holder can’t be elevated to status of books maintained by assessee within the meaning of sections 2(12A) and 44AA of the 1961 Act [corresponding to sections 2(19) and 62 of the 2025 Act]—Amitabh Bansal v. ITO [2019] 102 taxmann.com 229/175 ITD 401 (Delhi – Trib.); Vinesh Maheshwari v. ITO [2019] 103 taxmann.com 274/176 ITD 576 (Del. – Trib.).

3. Place where books of account and other documents to be kept and maintained [Rule 46(7)]

46.4 The prescribed books of account and other documents specified in Rule 46(1), (4) & (6) relating to the current year [i.e., other than those relating to a tax year which has come to an end] are required to be kept and maintained at the place where the person is carrying on the profession. Where the profession is being carried on at more than one places, such books and other documents must be kept and maintained at the principal place of his profession.

However, if the person keeps and maintains separate books of account in respect of each place where the profession is carried on, such books of account and other documents may be kept and maintained at the respective places at which the profession is carried on. This relaxation may not apply to a majority of persons who generally practice at one or at the most two places. At any rate, it is felt advisable to keep the records at just one place invariably, i.e., at the principal place at which the profession is carried on.

Where books of account of earlier years were admittedly maintained by assessee and profit and loss account, etc., were annexed along with returns filed in regular course of profession, merely because those books of account were not available at place of business at time of survey which was conducted after end of said assessment years, it could not be said that assessee had committed any default of non-production of books of account at time of survey. Therefore, penalties levied on assessee u/s 271A of the 1961 Act [corresponding to section 441 of the 2025 Act] for non-production of books of account at time of survey were not justified and were liable to be quashed—Dr. Vinay T. Karnawat Sillod v. ITO [2007] 104 ITD 108 (Pune – Trib.).

4. Electronic maintenance of books of account and other documents [Rule 46(8)]

46.5 The books of account and other documents specified in rule 46(1), (4) & (6) maintained in electronic mode shall remain accessible in India at all times, and the backup of such books of account and other documents maintained in electronic mode shall be kept on a daily basis in servers physically located in India.

5. Period for which books of account and other documents to be kept and maintained [Rule 46(9) & (10)]

46.6 The prescribed books of account and other documents specified in rule 46(1), (4) & (6) are required to be kept and maintained for a period of 7 tax years from the end of the relevant tax year.

However, where the assessing authority has reopened the assessment of the assessee u/s 279 of the 2025 Act or u/s 147 of the 1961 Act for any tax year, all the books of account and other documents which were kept and maintained at the time of reopening of the assessment should be preserved till the reassessment proceedings are completed, even if it entails retention of the records beyond the period of 7 years mentioned above.

6. Penal consequences

46.7 It must be noted that failure to maintain the prescribed records mentioned in para 46.3, or failure to preserve/retain the records as explained in para 46.6 will entail levy of penalty u/s 441. The quantum of penalty shall be a fixed amount of Rs. 25,000, which may be imposed by the AO or the Joint CIT(A) or the CIT(A).

7. Summarised table for compulsory maintenance of books of account and other documents

46.8 The requirement of section 62 and rule 46 for compulsory maintenance of books of account may be summarised by grouping different taxpayers in the following categories:—

Different categories	Taxpayers who come under these categories	Requirement of maintenance of books of account and other documents
Category A	Persons carrying on “specified profession” if their gross receipts in the profession do not exceed Rs. 1,50,000 in any one or more of the 3 years immediately preceding the tax year, or where the profession has been newly set up in the tax year, his gross total receipts in the profession for that year are not likely to exceed the said amount of Rs. 1,50,000	Persons falling in this category are not required to maintain any books of account
Category B	Persons carrying on “specified profession” if their gross receipts in the profession exceed Rs. 1,50,000 in all the 3 years immediately preceding the tax year, or where the profession has been newly set up in the tax year, his gross total receipts in the profession for that year are likely to exceed the said amount of Rs. 1,50,000	Persons falling in this category are required to maintain such books of account and other documents as are prescribed under Rule 46(4) & (6)
	Specified assessee mentioned in section 58(2) [Table: Sl. No. 3] who claims that the profit or gains actually earned from the specified profession are lower than the deemed profits referred therein, and whose total income exceeds the maximum amount which is not chargeable to income-tax
Category C	Persons carrying on any business or a non-specified profession if their income from such business or profession does not exceed Rs. 1,20,000 (Rs. 2,50,000, in case of individual or HUF), and the total sales, turnover or gross receipts thereof does not exceed Rs. 10,00,000 (Rs. 25,00,000 in case of individual or HUF), in all the 3 years immediately preceding the tax year (or when such profession or business is newly set up, income/total sales, turnover or gross receipts are not likely to exceed the said amount)	Persons falling in this category are not required to maintain any books of account
Category D	Persons carrying on any business or a non-specified profession if their income from such profession or business exceeds Rs. 1,20,000 (Rs. 2,50,000, in case of individual or HUF) or the total sales, turnover or gross receipts thereof exceeds Rs. 10,00,000 (Rs. 25,00,000, in case of individual or HUF) in any of the 3 years immediately preceding the tax year (or when such profession or business is newly set up, income/total sales, etc., are likely to exceed the said amount)	Persons falling under this category are required to maintain “such books of account and other documents that enable the AO to compute their total income under the 2025 Act”. In this regard, the CBDT has not prescribed any specified books of account which should be maintained for the persons falling under this category.
	Eligible assessees mentioned in section 58(2) [Table: Sl. Nos. 1 & 2] who claim that the profit or gains actually earned from the specified business are lower than the deemed profits referred therein, and whose total income exceeds the maximum amount which is not chargeable to income-tax.
	Eligible assessee opting for presumptive taxation u/s 58(2) [Table: Sl. No. 1] but fails to declare profits on that basis in any of the next 5 years, they lose the benefit of the presumptive taxation scheme for the following 5 years. Further, during such disqualification, if their income exceeds the maximum amount which is not chargeable to income-tax, they must maintain books of account.
	Specified assessees mentioned in section 61(2) [Table: Sl. Nos. 4 & 5] who claim that the profits actually earned from the specified business are lower than the deemed business profits referred therein.

In nutshell, only those taxpayers which are specified in Categories B and D are required to maintain books of account and other documents for computation of taxable income, and the CBDT has prescribed specific books of account and other documents only for those who come under Category B.

Analysis of changes in 2026 Rules vis-à-vis 1962 Rules

46.9 The following Table analyses the changes made in the IT Rules, 2026 vis-à-vis IT Rules, 1962:—

Sl. No.	Particulars	IT Rules, 1962	IT Rules, 2026
(1)	Threshold amount for keeping copies of bill or receipts issued	More than Rs. 25 [Rule 6F(2)(iv)]	Rs. 250 or more [Rule 46(4)(d)]
(2)	Threshold amount for keeping original bills and receipt in respect of expenditure incurred	Any amount [Rule 6F(2)(v)]	Rs. 250 or more [Rule 46(4)(e)]
(3)	Threshold amount for keeping payment vouchers	Up to Rs. 50 [Rule 6F(2)(v)]	Up to Rs. 250 [Rule 46(4)(f)]
(4)	Electronic maintenance of books of account and other documents	No specified provision was there	The books of account and other documents specified in Rule 46(1), (4) & (6) maintained in electronic mode shall remain accessible in India at all times, and the backup of such books of account and other documents maintained in electronic mode shall be kept on a daily basis in servers physically located in India. [Rule 46(8)]

 

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1. Relevant to section 62 of the 2025 Act; and corresponds to rule 6F of the 1962 Rules.
2. This definition is also given in Rule 46(5)(a) of the 2026 Rules.
3. This definition is also given in Rule 46(5)(c) of the 2026 Rules.
4. Authors’ Note:There is no mention of the professions of Company Secretary (CS) and information technology under the 1962 Rules or the 2026 Rules. However, these professionals are also covered for the purposes of rule 46(2).
5. Corresponds to Form No. 3C of the 1962 Rules.