§ 276
Chapter XVI — Procedure For Assessment
XVI-B. Method of accounting
Income-tax Act, 2025
Business owners must use either the cash or mercantile system of accounting to compute their income. The Central Government may specify standards for income computation and disclosure for certain classes of assessees or income. The Assessing Officer can make an assessment if the accounts are incorrect or incomplete, or if the accounting method is not followed regularly. This includes cases where
- accounts are incomplete
- accounting methods are not consistent
- income is not computed according to notified standards
📜 Official text of the section +
276. (1) Income chargeable under the head “Profits and gains of business or
profession” or “Income from other sources” shall, subject to the provisions of
sub-section (2), be computed as per either cash or mercantile system of accounting
regularly employed by the assessee.
(2) The Central Government may notify income computation and disclosure stan-
dards to be followed by any class of assessees or in respect of any class of income.
(3) The Assessing Officer may make an assessment in the manner provided in
section 271, where—
( a) he is not satisfied about the correctness or completeness of the accounts
of the assessee; or
( b) the method of accounting provided in sub-section (1) has not been reg-
ularly followed by the assessee; or
( c) income has not been computed as per the standards notified under
sub-section (2).
Method of accounting in certain cases.
Plain-language summary — not the official text. Refer to the bare Act and confirm with a professional for your specific case.