Rule 187 of Income explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Rule 187 of the Income-tax Rules, 2026 requires a registered non-profit organisation to keep books of account under section 347 plus ten categories of supporting records — projects, income, application, corpus, loans, properties and related-person transactions — at its registered office for six years from the end of the relevant tax year.
Two layers: books and records
Rule 187 replaces rule 17AA of the Income-tax Rules, 1962. It divides the obligation into books of account under clauses (a) to (c), and other documents under clause (d) — and it is clause (d) that carries the real weight.
Books of account — rule 187(1)(a) to (c)
Clause (a) requires books of account including:
- a cashbook;
- a ledger;
- a journal;
- copies of bills — machine numbered or otherwise serially numbered — where bills are issued, and copies or counterfoils of serially numbered receipts issued;
- original bills issued to the organisation and receipts for payments made by it; and
- any other book required to give a true and fair view of the state of affairs and to explain the transactions effected.
Clauses (b) and (c) then require the same set of books to be kept separately:
- (b) for a business undertaking referred to in section 344; and
- (c) for business carried on other than that business undertaking.
An NPO carrying on a section 344 business undertaking and some other business must maintain three parallel sets of books — general, section 344 undertaking, and other business. Consolidating them into a single ledger with departmental codes does not satisfy clauses (b) and (c) on their face. Set up the chart of accounts to keep them structurally separate.
The ten record categories — rule 187(1)(d)
| Item | Record required |
|---|---|
| (i) | All projects and institutions run — name, address and objectives |
| (ii) | Income during the tax year from: charitable or religious activity for which registered; any property, deposit or investment held; voluntary contributions; commercial activity permissible under sections 344, 345 and 346; specified income under section 337; and residual income under section 355(j) |
| (iii) | Application of current-year income — in India (amount, payee name and address, object); amounts credited or paid to another registered NPO (name, address, PAN, object); application outside India; deemed application under section 341(5) with reasons; income accumulated under section 342(1) with purpose; money invested in section 350 modes; and money invested outside section 350 modes |
| (iv) | Application of earlier-year income — out of accumulated income (year of accumulation, amount, payee, object); out of earlier deemed application; other application out of earlier accumulations; and money invested inside and outside section 350 modes |
| (v) | Corpus donations — donations with a specific direction to form part of corpus, for both the current and preceding tax years, with donor name, address, PAN and Aadhaar where available; application out of them; amounts credited to another registered NPO's corpus; investments inside and outside section 350 modes; and amounts reinvested back into a donation that was applied in an earlier year and not claimed as application |
| (vi) | Renovation or repair donations for a temple, mosque, gurdwara, church or other place notified under section 133(1)(b)(vi) treated as corpus under section 340 — including donations from preceding years later treated as corpus |
| (vii) | Loans and borrowings — amount and date of loan, amount and date of repayment, lender name, address, PAN and Aadhaar where available; application out of the loan for the current and preceding years; and repayment of a loan applied in an earlier year and not claimed as application |
| (viii) | Properties held — immovable property (nature, address, cost of acquisition, registration documents; and on transfer, the net consideration used to acquire a new capital asset) and movable property (nature and cost of acquisition) |
| (ix) | Related persons under section 355(h) — name, address, PAN and Aadhaar where available; and every transaction with them, giving date, amount, nature, and documents establishing that the transaction is not, directly or indirectly, for the benefit of that person |
| (x) | Any other documents containing any other relevant information |
The related-person record must include documents to the effect that the transaction is not, directly or indirectly, for the benefit of the related person. That is not a list of transactions — it is contemporaneous evidence of arm's-length justification. Comparative quotes, a board note recording the commercial rationale, valuation support: these need to be created at the time of the transaction, because reconstructing them during an assessment is rarely convincing.
Form, place and retention
Form — rule 187(2)
The books and documents may be kept in written form, electronic form, digital form, as printouts of data stored in electronic or digital form, or on any other form of electromagnetic data storage device. The rule is technology-neutral.
Place — rule 187(3) and (4)
Subject to sub-rule (4), the books must be kept at the organisation's registered office.
Under sub-rule (4), all or any of them may be kept at such other place in India as the management may decide by way of a resolution. Where such a resolution is passed, the organisation must, within seven days, intimate the jurisdictional Assessing Officer in writing, giving the full address of that other place, duly signed and verified by the person authorised to verify the return of income.
Keeping books away from the registered office requires (1) a management resolution, (2) a place in India, and (3) written intimation to the jurisdictional Assessing Officer within seven days, signed and verified by the section 265 person. Organisations that moved their accounting to an outsourced provider's premises often satisfy none of these. The fix is a board resolution and a one-page intimation — inexpensive, but it must actually be done.
Retention — rule 187(5) and (6)
Subject to sub-rule (6), the books and documents must be kept for six years from the end of the relevant tax year.
Under sub-rule (6), where the assessment for a tax year has been reopened under section 279 within the period specified in section 282, the books kept at the time of reopening must continue to be kept until the reopened assessment has become final.
Note the deliberate difference. Rule 46(9) requires a business or profession to keep books for seven tax years; rule 187(5) requires a registered NPO to keep them for six years. A firm advising both should not run a single retention policy across the two.
Rule 17AA and rule 187 compared
| Point | Rule 17AA (1962) | Rule 187 (2026) |
|---|---|---|
| Parent section | Section 12A(1)(b)(i) | Section 347 |
| Retention | Ten years from the end of the relevant assessment year | Six years from the end of the relevant tax year |
| Place | Registered office, or other place with intimation | Registered office, or other place in India with a resolution and seven-day intimation |
| Corpus records | Required | Required, expanded to reinvestment of previously applied donations |
| Related-person records | Specified persons under section 13(3) | Related persons under section 355(h), with benefit-negating documents |
| Reopening override | Tied to section 147 | Tied to section 279 read with section 282 |
Compliance checklist
- Maintain separate books for the general activity, the section 344 undertaking and any other business.
- Build the ten record categories in rule 187(1)(d) into the accounting system as standing registers, not year-end schedules.
- Capture donor PAN and Aadhaar for corpus donations where available.
- Record, at the time of each related-person transaction, the documents showing it is not for that person's benefit.
- If books are kept away from the registered office, pass a management resolution and file the seven-day written intimation with the jurisdictional Assessing Officer.
- Set retention at six years from the end of the tax year, extended where an assessment is reopened.
Common mistakes
- One consolidated ledger where clauses (b) and (c) require separate books.
- Treating item (ix) as a transaction listing. It requires benefit-negating documents.
- Moving records off-site without a resolution and intimation.
- Applying a ten-year retention policy carried over from rule 17AA, or a seven-year policy borrowed from rule 46.
- Omitting the reinvestment record in item (v)(X) for donations applied in an earlier year and not claimed as application.