Where Books of Account Must Be Kept — Multi-Location Practice Rules Explained

Section 62 of the Income Tax Act, 2025 requires persons carrying on business or profession to maintain books of account. However, determining where these books must be kept can be complex, especially for businesses and professionals with multiple locations. Understanding these rules is essential for compliance.

The General Rule

Place of Maintenance

The books of account and other documents shall be kept and maintained at:

Single Location: The place where the person is carrying on the business or profession

Multiple Locations: Where the business or profession is carried on in more places than one, at the principal place of business or profession

Separate Books: If the person keeps and maintains separate books of account in respect of each place where the business or profession is carried on, such books of account and other documents may be kept and maintained at the respective places

Multi-Location Practice Rules

Principal Place of Business

For multi-location practices, the books of account must be kept at the principal place of business or profession. The principal place is typically:

• The head office or main office
• The location where the business is centrally managed
• The place where the owner or key management is based

Separate Books for Each Location

If separate books are maintained for each location:

• Books for each location may be kept at that location
• This provides flexibility for businesses with multiple branches

Centralised Record Keeping

Businesses may choose to centralise record keeping:

• Books may be kept at a central location
• This is common for businesses with a head office
• The central location must be the principal place of business

Electronic Books of Account

Accessibility

Books maintained in electronic mode must remain accessible in India at all times. This means:

• The records must be accessible from anywhere in India
• The assessee must be able to produce the records when required

Backup

Backup of books maintained in electronic mode must be kept on a daily basis in servers physically located in India.

Location Independence

Electronic books provide location independence:

• Records can be accessed from any location
• Physical location of records is less relevant
• However, the backup requirement ensures data security

Special Considerations

Multi-Location Practices

For professionals with multiple practice locations:

• Books for each location may be kept at that location
• Alternatively, all books may be kept at the principal place
• The choice depends on the nature and size of the practice

Branch Offices

For businesses with branch offices:

• Books for each branch may be kept at that branch
• Consolidation may be done at the head office
• The principal place of business is typically the head office

Franchise Operations

For franchise operations:

• Each franchisee may maintain separate books
• The franchisor may maintain consolidated books
• The location of books depends on the arrangement

Consequences of Non-Compliance

Penalty

Failure to keep books at the prescribed place may attract penalty under the Act.

Disallowance of Expenditure

In the absence of proper books at the prescribed place, expenditure may be disallowed.

Best Judgment Assessment

In the absence of proper books, the Assessing Officer may make a best judgment assessment.

Expert Legal Guidance

Understanding where books of account must be kept is essential for tax compliance. Anuj Desai & Associates provides expert advisory services on Direct Tax Code compliance, helping businesses and professionals determine the appropriate place for maintaining books of account.

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