Rule 46 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 46 of the Income-tax Rules, 2026 prescribes the books of account to be kept under section 62 of the Income-tax Act, 2025. Specified professionals must maintain a cash book, journal, ledger and bills and vouchers of Rs 250 or more, keep them for seven tax years, and — if kept electronically — keep them accessible in India with a daily backup on servers physically located in India.
What rule 46 does
Rule 46 is the successor to rule 6F of the Income-tax Rules, 1962. It works in two layers, and confusing the two is the usual source of error.
Layer one — everyone. Rule 46(1) says that every person required to keep books under section 62(1)(b) must maintain such books of account and other documents as enable the Assessing Officer to compute his total income under the Act. There is no prescribed list here. The test is functional: could an officer compute total income from what you have kept?
Layer two — specified professions. Rule 46(2) then names particular professions and gives them a prescribed list in sub-rule (4). For them, the functional test is not enough; the named books must exist.
Who is in the specified list
Rule 46(2) applies to a person carrying on the profession of:
- law
- medicine
- engineering
- architecture
- accountancy
- technical consultancy
- interior decoration
- authorised representative
- film artist
Two of these carry their own definitions in rule 46(5). An "authorised representative" is someone who represents another person for a fee or remuneration before a Tribunal or before any authority constituted under any law — but the definition expressly excludes an employee of the person represented, a person carrying on the legal profession, and a person carrying on the profession of accountancy. A "film artist" is defined by a list of thirteen roles: actor, cameraman, director (including assistant director), music director (including assistant), art director (including assistant), dance director (including assistant), editor, singer, lyricist, story writer, screen-play writer, dialogue writer and dress designer.
The gross receipts escape hatch
Rule 46(3) switches off the prescribed-list obligation in two situations:
- where total gross receipts in the profession do not exceed Rs 1,50,000 in any one of the three years immediately preceding the tax year; or
- where the profession was newly set up in the tax year and gross receipts for that year are not likely to exceed Rs 1,50,000.
The test is not average receipts and not the current year's receipts. If receipts fell below Rs 1,50,000 in any single one of the three preceding years, sub-rule (2) does not apply for the tax year in question. That is a taxpayer-friendly reading, and it is what the rule says.
Note that switching off sub-rule (2) does not switch off sub-rule (1). The general obligation to keep enough records for total income to be computed always remains.
The prescribed books under sub-rule (4)
| Clause | What must be kept | Threshold |
|---|---|---|
| (a) | A cash book | Always |
| (b) | A journal, if accounts are on the mercantile system | Mercantile system only |
| (c) | A ledger | Always |
| (d) | Copies of bills or receipts issued by the person | Rs 250 or more |
| (e) | Original bills and receipts for expenditure incurred | Rs 250 or more |
| (f) | Payment vouchers prepared and signed by the person | Where expenditure is below Rs 250 and the cash book lacks adequate particulars |
The Rs 250 threshold is the substantive change here. Old rule 6F worked on a fifty-rupee threshold that had not been revisited in decades and had become meaningless. Rs 250 is still low, but it removes a large volume of trivial vouchers from the mandatory set.
Rule 46(5)(b) defines a "cash book" tightly: a record of all cash receipts and payments, kept and maintained day to day, giving the cash balance in hand at the end of each day or at the end of a specified period not exceeding a month.
The extra books for medical professionals
Rule 46(6) adds two items for a person carrying on the medical profession, on top of everything in sub-rule (4):
- a daily case register in Form No. 25; and
- an inventory, under broad heads, as on the first and the last day of the tax year, of the stock of drugs, medicines and other consumable accessories used for the profession.
Form No. 25 is the 2026 replacement for the old Form 3C daily case register. Practitioners who have been maintaining the old form should note the number has changed.
Where the books must be kept
Rule 46(7) gives three options:
- at the place where the profession is carried on;
- where the profession is carried on at more than one place, at the principal place; or
- where separate books are kept for each place, at the respective places.
The rule applies to books "other than those relating to a tax year which has come to an end" — so closed-year records need not sit at the place of profession, but they must still exist for the retention period.
Electronic books: the data localisation requirement
Rule 46(8) is new in substance and deserves attention from every firm using cloud accounting:
"The books of account and other documents ... 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."
Two distinct obligations sit in that sentence:
- Accessibility in India at all times. A system that can only be reached through an overseas login, or that goes dark during an overseas maintenance window, does not satisfy this.
- A daily backup on servers physically located in India. Note "physically located" — a data centre region label is not enough if the storage itself sits outside India, and the backup frequency is specified as daily, not weekly or "regular".
If your practice or your client keeps books on an overseas SaaS accounting platform, confirm in writing where the primary data and the backups physically reside, and whether a daily India-resident backup can be enabled. Where it cannot, a local daily export retained in India is the practical answer. This should be settled before the first tax year under the new Rules closes, not during an assessment.
Retention period: seven tax years
Rule 46(9) fixes the retention period at seven tax years from the end of the relevant tax year for the books specified in sub-rules (1), (4) and (6).
Rule 46(10) adds an important override. Where an assessment has been reopened — either under section 279 of the Income-tax Act, 2025 or under section 147 of the Income-tax Act, 1961 as it existed before its repeal — all books that were being kept at the time of reopening must continue to be kept until the reopened assessment is completed, whatever the seven-year clock says.
That cross-reference to the repealed section 147 matters: it means a reopening initiated under the old Act keeps the retention obligation alive under the new Rules.
Old rule 6F and new rule 46, side by side
| Point | Rule 6F (1962) | Rule 46 (2026) |
|---|---|---|
| Parent section | Section 44AA, Income-tax Act, 1961 | Section 62, Income-tax Act, 2025 |
| Bill and voucher threshold | Rs 50 | Rs 250 |
| Retention | Six years from the end of the relevant assessment year | Seven tax years from the end of the relevant tax year |
| Electronic books | No express localisation requirement in the rule | Accessible in India at all times; daily backup on Indian servers |
| Medical daily case register | Form 3C | Form No. 25 |
| Reopening override | Tied to section 147 of the 1961 Act | Tied to section 279 of the 2025 Act and section 147 of the repealed 1961 Act |
Worked example
Dr. Anita runs a clinic. Gross receipts were Rs 9,20,000, Rs 11,40,000 and Rs 1,30,000 in the three years immediately preceding tax year 2026-27.
Because receipts fell below Rs 1,50,000 in one of those three years, rule 46(3)(i) is satisfied and the prescribed list in sub-rule (4) does not bind her for tax year 2026-27. She must still satisfy rule 46(1) — records adequate for total income to be computed.
Now change one fact: receipts in the third year were Rs 3,10,000. All three years are above the threshold, sub-rule (2) applies, and she must keep a cash book, ledger, bills and receipts of Rs 250 or more, a daily case register in Form No. 25 and an opening and closing stock inventory of drugs and consumables — and, if her practice management software is cloud-based, satisfy rule 46(8) on India-resident daily backups.
Compliance checklist
- Confirm whether the client falls in the rule 46(2) list of professions.
- Test the Rs 1,50,000 threshold against each of the three preceding years separately.
- Reset voucher policy to the Rs 250 line.
- For medical practices, switch the daily case register to Form No. 25.
- Confirm where electronic books and their backups physically sit; enable a daily India-resident backup.
- Extend document retention schedules from six years to seven tax years.
- Flag any client with an open reopening — their retention obligation does not expire on the seven-year clock.
Common mistakes
- Reading sub-rule (3) as an average test. It is not; a single year below Rs 1,50,000 in the three preceding years is enough.
- Assuming sub-rule (3) removes all obligations. Sub-rule (1) still applies to everyone within section 62(1)(b).
- Keeping the Rs 50 voucher policy. It is now Rs 250, and continuing at Rs 50 simply means unnecessary work.
- Treating an offshore backup as compliant. Rule 46(8) says servers physically located in India, backed up daily.
- Destroying records at six years. The period is now seven tax years, and longer where an assessment has been reopened.