A significant change in Income Tax compliance has been introduced effective 1st April 2026, which may directly impact you if you maintain books of accounts in electronic form.
Key Requirement (Rule 46(8))
Daily backup of books of accounts is mandatory
* Backup must be stored on physical servers located in India
* Books of accounts must remain accessible in India at all times
Applicability
This applies to:
* Persons maintaining books under Section 62
* Persons liable for audit under Section 63
*For Cloud Accounting Users*
If your accounting data is hosted on servers outside India, you must ensure compliant backup is maintained on servers within India.
*Impact on Tax Audit (Clause 14)*
The tax audit report will now require reporting of:
* Accounting software used and *server location*
* Compliance status of Rule 46(8)
* *Address of backup server in India
* Auditor’s observations, if any
*Penalties*
* ?25,000 for non-maintenance of books as per prescribed rules
* ?10,000 penalty on Chartered Accountant for incorrect certification
*Immediate Action Points*
* Review your current data storage and backup system
* Ensure India-based backup implementation
* Maintain proper documentation for audit purposes
* Coordinate with your CA and IT team to ensure compliance
This is not merely a technical change—it represents a major compliance shift. Timely action is essential to avoid adverse reporting in your audit.
For any assistance or clarification, feel free to contact us.
Warm regards,
Rakesh Ashok & Co.
Chartered Accountants