Rule 46(8) of the Income-tax Rules 2026 is real and in force from 1 April 2026. The notified text (G.S.R. 198(E), 20 March 2026) says electronic books must remain accessible in India at all times, with their backup kept on a daily basis in servers physically located in India. Tax auditors report on it in Form No. 26.
Sources: Income-tax Rules, 2026 (Notification No. 22/2026) and sections 441 and 463 of the Income-tax Act, 2025, on the Income Tax Department's website, read on 10 October 2026.
Not legal or tax advice. TallyoCloud is a hosting provider, not a firm of chartered accountants. This page reports what the notified text says and how backups work in TallyPrime. Whether Rule 46(8) applies to your business, and whether your setup meets it, is for your CA to confirm, ideally in writing.
What the notified text of Rule 46(8) says
Rule 46 of the Income-tax Rules, 2026 is headed "Maintenance of books of account under section 62". Its first seven sub-rules say which books must be kept, by whom and where. Sub-rule (8) is the one about books kept on a computer. This is its full text, as printed in the Gazette of India:
46. Maintenance of books of account under section 62. …
(8) The books of account and other documents specified in sub-rules (1), (4) and (6) maintained in electronic mode shall remain accessible in India at all times1, and the backup of such books of account and other documents maintained in electronic mode, shall be kept on a daily basis2 in servers physically located in India3.
Read it slowly and you'll find three separate duties. All three apply only to books kept "in electronic mode", which covers anyone keeping accounts in TallyPrime or any other accounting software:
- 1Accessible in IndiaThe books must be reachable from India at all times, not only when an office PC or a vendor's portal happens to be up.
- 2Every dayThe rule sets how often, not what time. It doesn't say "at the close of each business day".
- 3Backup on Indian servers"Physically" matters. An Indian login page or billing address isn't enough if the backup files sit abroad.
Notice what the text doesn't say. It names no software. On a plain reading, it doesn't stop you keeping the live books outside India, as long as they stay accessible here and the daily backup lands on an Indian server. It also sets no retention period for the backup itself; the seven-tax-year period in sub-rule (9) is for the books. Your CA should confirm that reading for your own case.
Why some sources said Rule 46(8) didn't exist
If you searched for this rule in mid-2026, you found two stories. Tally Solutions' guide to the daily backup requirement (published 4 June 2026) and several CA firms described a daily backup on Indian servers. At least one CA firm's blog said in May 2026 that the notified Rules contained no such clause. Most articles paraphrased the rule without quoting it, and the official PDF of the Rules runs to almost a thousand pages, so the question was hard to settle from secondary sources.
We read the notified text on the Income Tax Department's website on 10 October 2026. Sub-rule (8) is on page 1570 of that gazette issue, and Form No. 26 asks auditors about "rule 46(8)" by name. So the rule exists. Some popular summaries still got the details slightly wrong:
| What you may have read | Verdict | What the notified text says |
|---|---|---|
| Backups must be on servers physically located in India | Right | Word for word in sub-rule (8). |
| Electronic books must stay accessible in India | Right | Also in sub-rule (8): "at all times". |
| The backup must be taken at the close of each business day | Close | The text says "on a daily basis". It doesn't fix a time of day. |
| It applies to every business | Too broad | It covers the books in Rule 46(1), (4) and (6), kept electronically. That ties it to people who must keep books under section 62. |
| A missed backup means a ₹25,000 penalty | Simplified | Section 441 allows ₹25,000 for failing to keep books "as per section 62 or the rules made thereunder". It doesn't mention backups by name. |
| The notified Rules have no daily-backup clause | Not right | Sub-rule (8) is in the notified Rules, and Form No. 26 refers to it. |
Who Rule 46(8) applies to
Rule 46(8) doesn't list people. It points to the books in sub-rules (1), (4) and (6), and those sub-rules point to section 62 of the Income-tax Act, 2025. In short, it reaches you if you must keep books under section 62 and you keep them electronically. Section 62 covers:
| Who | What section 62 and Rule 46 say |
|---|---|
| Specified professions | Legal, medical, engineering, architectural, accountancy, technical consultancy, interior decoration, information technology and company secretary work (section 62(4)). Rule 46(4) names the books for many of them: cash book, journal, ledger, copies of bills, and vouchers. |
| Other businesses and professions | Income from the business above ₹1,20,000, or turnover or gross receipts above ₹10 lakh, in any one of the three preceding years. For individuals and HUFs, the limits are ₹2,50,000 and ₹25 lakh. A new business counts if it's likely to cross them. |
| Some presumptive-tax cases | People under the presumptive schemes in section 58(2) or 61(2) who claim income lower than the deemed profits (section 62(2)(c)). |
| Doctors, in addition | A daily case register in Form No. 25 and a stock inventory of drugs and consumables (Rule 46(6)). |
Summarised from section 62 and Rule 46 as published by the Income Tax Department. Limits and exceptions have more detail than fits here; your CA will apply them to your figures.
Companies, LLPs and partnership firms aren't named separately. They come in through section 62(1)(b) like any other business, subject to the same limits. If your accounts are audited under section 63, you'll normally be inside section 62 as well, but let your CA confirm it.
On timing, the Rules came into force on 1 April 2026, so the daily backup duty runs from that date, which is tax year 2026–27 onwards. If your books are on paper, sub-rule (8) doesn't bite. Almost every TallyPrime user keeps books electronically, though.
Below the limits? If you aren't required to keep books under section 62, the wording of Rule 46(8) doesn't reach you. The limits look back three years, though, so check with your CA before deciding you're out. A daily backup in India is cheap insurance either way.
What Form No. 26 asks your tax auditor
Form No. 26 is the new tax audit report under section 63, prescribed by Rule 47. It takes the place of the old Form 3CD for audits under the new Act, so most businesses will first meet it when tax year 2026–27 is audited. Its section on books of account turns Rule 46(8) into direct questions:
| Clause | What Form No. 26 asks | What to have ready |
|---|---|---|
| 13 | List of books of account maintained (including those maintained in computer system) | Your TallyPrime companies and the books each one holds |
| 14(a) | Address at which such books of account are maintained, for every location | Your office address, plus the server's location if the books run on a cloud server |
| 14(b) | The accounting software used for maintenance of books of account | TallyPrime and its release, shown under F1 › About |
| 14(c) | Details of any cloud or other software used for storage of books, with location (internet protocol address and country) | Your host's name, the server's public IP address, and "India" |
| 14(d) | Whether provisions of rule 46(8) have been complied with? Yes/No | Your backup schedule and a daily backup log for the year |
| 14(e) | If yes, address of location where backup server is located in India | The backup site's address, in writing from your provider |
The middle column follows the wording of Form No. 26 as notified with the Income-tax Rules, 2026 (gazette page 1879). "What to have ready" is our suggestion.
Your auditor signs this report, and section 463 makes an accountant liable to ₹10,000 for each report that contains incorrect information. Expect your CA to ask for evidence, not just a "yes". If you can't say which country your backups are in, clause 14(d) is hard to answer honestly. CA firms getting these questions from every audit client will find our Tally on Cloud for CA firms page useful.
Companies: an older rule applies as well
Companies had a version of this rule years before 2026. The Companies (Accounts) Rules, 2014, as amended on 5 August 2022 by G.S.R. 624(E) (SCC Online summary, text reproduced by ICAI Navi Mumbai), set out very similar duties. A company that keeps books electronically has to satisfy both sets:
| Income-tax Rule 46(8) | Companies (Accounts) Rules, rule 3 | |
|---|---|---|
| Who | People who must keep books under section 62, for books kept electronically | Companies keeping books electronically |
| Access | Accessible in India at all times | Accessible in India at all times (rule 3(1)) |
| Backup | Servers physically located in India | Servers physically located in India (rule 3(5)) |
| How often | Daily | Daily |
| Who checks | Your tax auditor, in Form No. 26, clause 14 | The Registrar: each year, with the financial statements, the provider's name, IP address, location and cloud address (rule 3(6)) |
| From | 1 April 2026 | Amended 5 August 2022 |
For a company, one well-run daily backup in India can serve both rules, as long as you keep the paperwork for both: provider details for the Registrar and backup evidence for the tax auditor. Our Tally on Cloud security page explains how we handle the companies rule.
Meeting Rule 46(8) when TallyPrime runs on your office PC
You don't need a cloud server to follow this rule. If TallyPrime runs on a computer in your office, its own tools can cover the backup part, as long as the destination is a server in India and the PC is on when the backup runs:
- Turn on Auto Backup. In TallyPrime 7.0 or later, press Alt+Y › Backup & Restore › Schedule Backup, choose Daily and set a time. Tally's scheduled backup help page explains each option.
- Pick a destination you can show is in India. The rule says "servers". A backup server or NAS in your office may well count; a USB drive in a drawer is harder to argue. Ask your CA what they'll accept.
- Get the location in writing for any online copy. Personal Google Drive and OneDrive plans don't let you choose or prove the storage country, and the TallyDrive page we read doesn't name one. Ask the provider and file their answer.
- Keep the PC awake. Scheduled backups don't run while the computer is off, asleep or hibernating. A missed night is a missed "daily".
- Keep a log. Check the Schedule Backup report each morning or week, note any gaps, and run a restore test now and then.
Our Tally data backup guide has the full menus for every release, including TallyPrime 6.2 and Tally.ERP 9, plus a monthly restore drill.
How a Tally cloud server in India can help
When TallyPrime runs on a cloud server, the live books and the backups both sit in a data centre, and the server never sleeps. The "daily" part stops depending on someone leaving a PC on. A host can help you meet Rule 46(8), but only if it can show three things: its servers are physically in India, a backup runs every day, and there's a record of it.
This is what you get on a TallyoCloud private server:
- Location in India. Your server runs in Mumbai, India, and backup copies sit on separate storage that is also in India. We name the facility in your quote.
- Backups every day. Daily automated backups with 30-day retention, plus TallyPrime's own Auto Backup on the server, so you can restore one company without rolling back the rest.
- Paperwork for your auditor. A signed letter with our name, your server's IP address, the location and the backup schedule, plus a daily backup log. That gives you what clause 14(c) to (e) asks for and, for companies, the details for the Registrar.
- Your own copy, any time. Press Alt+Y › Backup & Restore › Backup and save to your own computer from inside the Remote Desktop session. No ticket, no fee.
Plans start with a private server from ₹799 a month plus GST; see Tally on Cloud pricing. If your books are on an office PC today, moving them takes one backup and one restore, covered step by step in our guide to moving Tally data to the cloud. Whichever host you choose, ask for the same evidence. Our 12-point provider checklist lists the questions.
Rule 46(8) self-check: which backup rules apply to you?
Answer four questions to see which rules are likely to apply, then download an evidence checklist to take to your CA. It's a starting point for that conversation, not a ruling.
Your business, in four answers
Based on the notified text of Rule 46, Form No. 26 and the Companies (Accounts) Rules. General information, not legal or tax advice.
- Income-tax Rule 46(8)AppliesDaily backup on servers physically in India; books accessible in India at all times.
- Companies (Accounts) Rules 3(5) and 3(6)AppliesDaily backup in India, and yearly provider details to the Registrar.
- Form No. 26, clause 14AppliesYour auditor reports your software, storage, IP address and Rule 46(8) compliance.
Your evidence checklist
- Software and release: TallyPrime release from F1 › About, and the companies and books you keep.
- Where the live books are: office address, or your host's name, server IP address and country.
- Backup location in India: the backup server's address, in writing from your provider.
- Backup schedule: how often, at what time, and how long backups are kept.
- Daily backup log: one entry a day for the tax year, or your provider's log.
- Restore test record: date and result of at least one restore test.
- Provider-details letter: provider's name, IP address, location and cloud address, for the Registrar filing.
- Your answer to clause 14(d): agree Yes or No with your auditor before the report is signed.
Build your evidence pack before the audit
Whatever your setup, the safest position at audit time is a folder you can hand over without scrambling. Keep these together for each tax year:
- A location statement: where the live books and the backups are, with addresses, IP address and country.
- The backup schedule: frequency, time and retention, as set in TallyPrime or by your host.
- A daily backup log: proof that "daily" really happened, including how you handled any missed day.
- Restore-test records: a backup nobody has restored is a guess.
- For companies, the provider-details letter used for the Registrar filing.
Add a check of this folder to your year-end routine. Our TallyPrime year-end checklist covers the rest of the closing work, and our Tally on Cloud features page shows a sample provider-details letter.
Sources
- Income-tax Rules, 2026, rule 46 (gazette pages 1569–1570) and Form No. 26 (pages 1875–1879): Notification No. 22/2026, G.S.R. 198(E), 20 March 2026, Income Tax Department, read 10 October 2026
- Income-tax Act, 2025: section 62, section 441 and section 463, Income Tax Department
- Companies (Accounts) Fourth Amendment Rules, 2022 (G.S.R. 624(E)), via SCC Online and the ICAI Navi Mumbai branch
- Everything you need to know about the daily data backup requirement, Tally Solutions, published 4 June 2026, updated 5 June 2026
- Back up to a local drive and schedule backups and TallyDrive, Tally Solutions
TallyPrime, TallyDrive and Tally.ERP 9 are trademarks of Tally Solutions Pvt. Ltd. TallyoCloud is an independent hosting provider and is not affiliated with Tally Solutions or the Income Tax Department. This guide is general information, not legal or tax advice; confirm how these rules apply to you with your CA.
Frequently asked questions
Does Rule 46(8) require a daily backup on servers in India?
Yes. Rule 46(8) of the Income-tax Rules 2026, notified as G.S.R. 198(E) on 20 March 2026, says books of account kept in electronic mode must remain accessible in India at all times, and their backup must be kept on a daily basis in servers physically located in India. For a while sources disagreed, and one CA firm said no such clause existed. This page quotes the gazette text directly.
Who does Rule 46(8) apply to?
It covers the books named in Rule 46(1), (4) and (6) when they are kept electronically. Those sub-rules tie it to people who must keep books under section 62 of the Income-tax Act 2025, including specified professionals such as doctors, lawyers and accountants. It applies from 1 April 2026, so from tax year 2026–27. Whether you're covered depends on your income, turnover and profession, so confirm your own position with your CA.
What is the penalty for not following Rule 46(8)?
Section 441 of the Income-tax Act 2025 allows a penalty of ₹25,000 when a person fails to keep and maintain books as required by section 62 or the rules made under it, and Rule 46 is made under section 62. Separately, section 463 sets ₹10,000 per report for incorrect information in an accountant's report. How either applies to a missed backup is a question for your CA.
What does Form 26 ask about backups and servers?
Clause 14 of Form No. 26, the new tax audit report under section 63, asks for the address where books are kept, the accounting software used, details of any cloud or other storage with its IP address and country, whether Rule 46(8) has been complied with, and if so, the address where the backup server is located in India. Have these details in writing before your audit.
Is there a backup rule I must follow regardless?
If you are a company, yes. The Companies (Accounts) Rules require daily backups of electronic books on servers physically in India and an annual filing of your provider's name, IP address and location. That rule applies alongside Rule 46(8). Other businesses should still back up daily as good practice and check their obligations with a CA.
Does a TallyDrive or Google Drive backup count for Rule 46(8)?
Only if you can show the backup sits on servers physically located in India. Personal Google Drive and OneDrive plans don't let you choose or prove the storage country, and the TallyDrive page we read doesn't state where backups are stored. Ask the provider in writing and keep the answer with your audit papers. A server whose Indian address you can document is easier to defend.
Can a cloud server in India help me comply?
It can help, if backups are taken every day, stored on servers physically in India and provable. Ask your provider for the data-centre location, backup schedule, retention period and sample backup logs. TallyoCloud supplies these as a signed letter and log for you and your auditor. Whether your overall setup meets the rule is still for your CA to confirm.