Introduction
As per section 347 of the Act, every registered non-profit organization, whose total income before giving effect of the exemption, exceeds the maximum amount which is not chargeable to income-tax in any tax year, is required to keep and maintain the books of account and other documents in such form and manner and at such place as prescribed.
Rule 187 of the Income Tax Rules, 2026 prescribes what records and books a Non-profit organization must maintain, especially those claiming tax exemption under Part B of chapter XVII of the Income Tax Act, 2025. The rule mandates the maintenance of proper books and documents to ensure:
- Transparency of income and expenditure,
- Proper application of income toward charitable or religious purposes,
- Easy verification of the use of funds by the Income Tax Department.
- Books of Account: Entities must maintain the following books:
- Cash Book – Daily record of cash receipts and payments.
- Ledger – Summary of all accounts.
- Journal – Record of all transactions (if accounts are maintained on mercantile basis). Even the records are maintained in cash basis, journal is recommended so that vendor ledger, TDS ledger, PF ledger etc. can be maintained.
- Copies of Bills and Receipts – Including:
- Machine-numbered or serially numbered bills issued by the entity.
- Machine-numbered or serially numbered receipts issued by the entity
- Original Bills and Receipts – For payments made by the entity.
- Other Necessary Books – Any other book required to present a true and fair view of the entity's financial affairs and to explain transactions
- Books of account, as referred to above, for business undertaking as referred in Section 344 & for business carried on by the assessee other than the business undertaking referred in Section 344.
- Other Mandatory Documents [Rule 187(1)(d)]: The organisation must maintain documents to provide a record of:
- Projects and Institutions
- Income Details
- Application of Income (Current as well as Preceding year)
- Corpus Donation
- Donations for Renovation/Repair
- Loans and Borrowings
- Fixed and Movable Assets
- Related Party persons as referred under section 355(h)
- Other Relevant documents necessary to explain the activities and application of Income.
Books of account and other documents can be maintained in:
- Written form
- Electronic form
- Digital form
- Printouts of data stored in electronic or digital form
- Any other form of electromagnetic data storage device
Books of account and other documents should be kept at the registered office of the entity. However, they can be maintained at another place in India if:
- The management passes a resolution to that effect.
- The entity informs the jurisdictional Assessing Officer in writing within seven days, providing the full address of the other place.
- The intimation is duly signed and verified by the person authorized to verify the return of income under section 265 of the Act.
As per the Rule 187(5) of Income Tax Rules, 2026, books of account and other documents shall be kept and maintained for a period of six years from the end of the relevant Tax year. As per the Rule 187(6) of Income Tax Rules, 2026, if an assessment is reopened under section 279, the records must be maintained until the assessment is finalized.
