Section 276
Section 276: method of accounting
Section 276 sets the basic rule for computing income under the heads "Profits and gains of business or profession" and "Income from other sources": it must follow the cash or mercantile system of accounting the assessee regularly employs, subject to any income computation and disclosure standards (ICDS) the Central Government notifies.
This explanation is AI-assisted and pending review by our CA/CS team. It is general information, not professional advice - always cross-check against the bare law text above or talk to our tax team for guidance specific to your situation.
The basic rule
Income chargeable under "Profits and gains of business or profession" or "Income from other sources" must be computed on either the cash system or the mercantile system of accounting, whichever the assessee regularly employs, subject to sub-section (2).
Income computation and disclosure standards (ICDS)
The Central Government may notify income computation and disclosure standards to be followed by any class of assessees, or in respect of any class of income.
When the Assessing Officer can make a best-judgment assessment
The Assessing Officer may make an assessment in the manner provided in section 271 (best-judgment assessment) if:
- he is not satisfied about the correctness or completeness of the assessee's accounts; or
- the method of accounting under sub-section (1) has not been regularly followed by the assessee; or
- income has not been computed as per the standards notified under sub-section (2).
Frequently asked questions
What accounting methods are permitted under Section 276?
Either the cash system or the mercantile system of accounting, provided the assessee regularly employs that system - subject to any income computation and disclosure standards notified by the Central Government.
What happens if my accounts are not regularly maintained on a consistent method?
Under Section 276(3), the Assessing Officer may make a best-judgment assessment under section 271 if he is not satisfied about the correctness or completeness of the accounts, if the accounting method has not been regularly followed, or if income has not been computed as per notified ICDS.
Related sections
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Talk to our team about a best-judgment assessment under Section 276Last updated 9 September 2026