Maintaining Books of Accounts in India (2025-26 Guide)
Maintaining proper books of accounts is no longer just “good practice”—in 2025-26, it is a strict legal requirement under both the Income Tax Act and the GST law.Whether you're a business owner, freelancer, consultant, trader, or startup founder, thi...
Maintaining proper books of accounts is no longer just “good practice”—in 2025-26, it is a strict legal requirement under both the Income Tax Act and the GST law.
Whether you're a business owner, freelancer, consultant, trader, or startup founder, this guide covers everything you must maintain in FY 2025–26.
⭐ Who Should Read This Guide?
Salaried persons with side income
Freelancers, professionals (CA, doctors, architects, engineers, designers, consultants)
Small businesses, shop owners, traders
Companies, LLPs, partnership firms
GST-registered entities
Anyone who wants clean books for loans, fundraising, and reduced tax scrutiny
What Are Books of Accounts?
Books of accounts include all the records that show the true financial position of your business — income, expenses, assets, liabilities, stock, payments, receipts, and balances.
Examples include:
Cash Book
Ledger
Purchase & Sales Register
Expense Register
Fixed Asset Register
GST Sales/Purchase Summary
Bank Book & Bank Reconciliation
Inventory Records
Journal Entries
Digital formats are fully allowed.
Who Must Maintain Books of Accounts? (Section 44AA Updated for 2025-26)
A. Mandatory for ALL Businesses & Professionals If:
As per Income Tax Act (Section 44AA), books must be maintained if:
Businesses (Non-professionals)
Books mandatory if:
Income > ₹2,50,000 in any of the last 3 years, OR
Turnover > ₹25,00,000 in any of the last 3 years
Professionals (Specified Professions)
Doctors, CAs, engineers, architects, interior designers, lawyers, technical consultants, actors, etc.
Books mandatory if:
- Gross receipts > ₹2,50,000 in any of the last 3 years
Note: Even if receipts are lower, many professionals maintain books to avoid scrutiny.
B. Mandatory if You Opt Out of Presumptive Taxation
You must maintain books if you stop using:
44AD (Small Businesses)
44ADA (Professionals)
44AE (Transporters)
or if your income differs from presumptive limits.
Books Required Under Income Tax (Updated 2025-26 List)
Section 44AA requires maintaining the following:
For Businesses:
Cash Book
Ledgers
Journal (if mercantile system used)
Bills/vouchers of expenses
Purchase & Sales Register
Inventory statements
For Professionals (additional mandatory records):
Daily Cash Register
Receipt Books
Payment Vouchers
Original Bills for expenses
Copies of Bills issued
Inventory of consumables
GST Requirements for Book Keeping (2025-26 Rules)
Every GST-registered entity must maintain:
Outward Supplies Register
Inward Supplies Register
Stock Register
Input Tax Credit Register
Output Tax Liability Register
Vendor & Customer Ledgers
Delivery challans
E-way bill records
E-invoice logs (if applicable)
Retention Requirement
All GST records must be preserved for 6 years from the due date of annual return.
For How Many Years Must You Keep Books?
📌 Income Tax Act: Minimum 6 years
📌 GST Act: Minimum 6 years
📌 Companies Act: Minimum 8 years
: Digital Bookkeeping is Fully Valid (2025-26)
Digital records are allowed if:
Data is timestamped
Proper audit trail
Backups maintained
Readable format available at the time of assessment
Tools accepted:
Tally
Zoho Books
QuickBooks alternatives (RedBooks, Vyapar, myBillBook)
Excel / Google Sheets
ERP systems
: Penalties for Not Maintaining Books (2025 Updated)
Income Tax Penalty (Sec 271A):
❌ ₹25,000 for failure to maintain books
Penalty for Incorrect Books (Sec 271B):
If it leads to failure in tax audit:
❌ ₹1,50,000 OR
❌ 0.5% of turnover (whichever is lower)
GST Penalties:
❌ Minimum: ₹10,000
❌ Higher_side: Equal to amount of tax evaded
: Why Maintaining Books is Important (Real Benefits)
✔ Helps you claim more tax deductions
✔ Prevents GST mismatches (ITC issues)
✔ Reduces risk of Income Tax notice
✔ Required for loans, credit card limits, visa, tenders
✔ Helps manage cash flow
✔ Essential for startup fundraising
: Practical Examples (2025)
Example 1: Freelancer Designer — Income ₹7,80,000
Books mandatory since income > ₹2,50,000.
Digital bookkeeping + GST summary advised.
Example 2: Trader with Turnover ₹42 lakh, Using 44AD
Books not mandatory if presumptive taxation used,
BUT recommended to avoid GST mismatches.
Example 3: Doctor with ₹22 lakh receipts
Books + daily cash register mandatory.
: WonderTax Can Maintain Your Books Professionally
We offer:
Monthly bookkeeping
GST reconciliation
TDS & payroll
MIS reporting
Support for income tax & GST scrutiny
Dedicated account manager
👉 Explore services: https://wondertax.in/contact-us/services
: FAQs — Maintaining Books of Accounts (Updated 2025)
Q1. Can I keep books only in Excel?
Yes, fully valid if proper vouchers & audit trail exist.
Q2. Is digital bookkeeping acceptable during Income Tax scrutiny?
Yes, provided records are readable & complete.
Q3. Do individuals with only salary income need books?
No, unless they have business/professional income.
Q4. Are books compulsory under GST?
Yes, for ALL GST-registered businesses.
Q5. Do I need a CA?
Not mandatory, but helpful for compliance + tax savings.
: Final CTA
Need help maintaining clean books of accounts for FY 2025–26?
👉 Get expert bookkeeping with WonderTax — Affordable & Reliable.
https://wondertax.in/contact-us
