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Section 347Charitable Trusts & NPOswas Section 12A, Rule 187 (IT Rules 2026) in IT Act 1961

Books of Accounts — Mandatory for All Charitable Organisations

Every registered NPO must maintain prescribed books of accounts including cash books, ledgers, journals, and statements of receipts and payments. The books must be maintained at the trust's principal office and preserved for at least 10 years. Poor record-keeping is a common reason for loss of exemption during assessments.

Who this applies to

All registered NPOs without exception — from small village charities to large hospital trusts.

Key Points

  • Mandatory books: cash book, ledger, journal, and receipts-and-payments account
  • Books must be maintained at the registered office or principal place of activity
  • Preservation period: minimum 10 years from the end of the relevant financial year
  • Failure to maintain proper books can result in cancellation of registration
  • For trusts with gross receipts above ₹2.5 crore: additional prescribed records are required as per Rules
  • Electronic records are acceptable provided they can be converted to printed form and verified

Worked Example

1

Minimum Books Required for a Small Trust

Scenario

A small charitable trust runs a free coaching centre with annual receipts of ₹15 lakh. What minimum books must it maintain?

Calculation

Required books for EVERY registered NPO:

1. Cash Book: All cash receipts (donations, fees)
   and payments (salaries, rent, supplies)
   Updated: Daily

2. Ledger: Separate accounts for donors, expenses,
   assets, corpus fund, accumulated funds

3. Receipts & Payments Account:
   Summary at year end of all money inflows/outflows

4. Income & Expenditure Account:
   (Like P&L — distinguishes capital and revenue)

5. Balance Sheet:
   Assets: Fixed assets + Corpus + Reserves
   Liabilities: Creditors + Grants payable

Preservation: 10 years minimum

Result

A small trust can use free accounting software — manual books are also valid. These records allow the trust to prepare its ITR (ITR-7) and audit report (Form 10B) and respond to any assessment queries.

Related Sections

Section 348Audit of Accounts — Mandatory for NPOs above ₹2.5 Lakh
Section 349Filing Income Tax Return for Charitable Organisations
Section 332Registration of Charitable Trusts and NPOs
Section 341Application of Income — The 85% Charitable Spending Rule

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Section references are based on the Income Tax Act 2025 (Tax Year 2026-27). Examples are illustrative — verify with a Chartered Accountant before filing.