Compliance with Rule 46(8) of Income-tax Rules, 2026

Key Requirement Under Rule 46(8):

With effect as per the Income-tax Rules, 2026:

All books of account and related documents maintained in electronic (digital) mode must remain accessible in India at all times.
A mandatory daily backup of such electronic books of account and documents must be maintained on servers that are physically located in India.

Who is Impacted:

This requirement applies to all persons and entities required to maintain books of account under the Income-tax Act, including professionals, businesses and organizations maintaining accounts digitally or on cloud-based systems.

Implications:

Cloud or digital accounting systems must ensure India-based server storage for daily backups.
Non-compliance may attract penalties and adverse consequences during tax assessments.
Existing IT, accounting, and data storage practices should be reviewed immediately to ensure compliance.

Action Required:

Verify that accounting software, ERP systems, and backup processes comply with the above requirements.
Ensure that IT, Finance & Compliance teams confirm that daily backups are properly configured and stored on servers physically located in India.
Maintain appropriate documentation evidencing compliance as part of internal control and audit records.

Complete Circular attached here

Compliance with Rule 46(8) of Income-tax Rules, 2026

Key Requirement Under Rule 46(8):

Who is Impacted:

Implications:

Action Required:

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