Electronic Books explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
A company may keep its books of account in electronic mode, but rule 3 of the Companies (Accounts) Rules, 2014 sets conditions: the records must stay accessible in India at all times, the back-up must sit on servers physically located in India on a daily basis, the service provider details must be intimated to the Registrar each year, and the accounting software must record an audit trail. This guide goes through each requirement, as per the Companies Act, 2013 in the Ministry's consolidated text (last updated 29 July 2022) and the Rules as consolidated in the Ministry's e-book, consulted on 3 October 2026. Later amendments should be checked.
Section 128(1) lets a company keep books of account in electronic mode in the manner prescribed. Rule 3 says they must stay accessible in India, at all times, and the back-up must be kept on servers physically located in India on a daily basis. The company must intimate the Registrar annually, with the financial statement, the service provider's name, internet protocol address and location, and the cloud address where relevant. Accounting software must have a feature that records an audit trail of every transaction, which the auditor reports on.
What the Act says
Section 128(1): every company prepares and keeps at its registered office books of account, other relevant books and papers and financial statements for every financial year, which give a true and fair view and explain the transactions at the registered office and branches, kept on accrual basis and according to the double entry system. The first proviso lets the Board decide to keep them at another place in India; the company must file a notice with the full address of that other place within seven days. The second proviso: the company may keep the books of account and other papers in electronic mode in such manner as may be prescribed. Rule 2A of the Accounts Rules says the notice of the address under the first proviso is in Form AOC-5.
Section 128(3) makes the books open for inspection by any director at the registered office or other place in India during business hours, with a proviso for a subsidiary's books. Section 128(5) requires the books for a period of not less than eight financial years immediately preceding a financial year, or all preceding years if the company has existed for a shorter period, together with the vouchers, to be kept in good order. Section 128(6) prints fines on the managing director, the whole-time director in charge of finance, the CFO or any other person charged by the Board, for contravention.
For help with books and registers, see our books of accounts compliance service. For the section generally, see our guide on section 128.
Rule 3, sub-rule by sub-rule
| Requirement | What the rule prints | Source |
|---|---|---|
| Accessible in India | Books and papers in electronic mode remain accessible in India, at all times, so as to be usable for subsequent reference | Rule 3(1) |
| Audit trail | For a financial year commencing on or after 1 April 2023 (as printed in the e-book), every company using accounting software must use only software with a feature of recording an audit trail of each and every transaction, creating an edit log of each change with the date, and ensuring the audit trail cannot be disabled | Proviso to rule 3(1) |
| Format retained | Retained completely in the format originally generated, sent or received, or a format that presents the information accurately; complete and unaltered | Rule 3(2) |
| Branch data | Information received from branches is not altered and shows what was originally received | Rule 3(3) |
| Legible display | The electronic record must be capable of being displayed in legible form | Rule 3(4) |
| System of storage | A proper system for storage, retrieval, display or printout as the audit committee, if any, or the Board deems appropriate; records not disposed of or made unusable unless permitted by law | Rule 3(5) |
| Daily back-up in India | The back-up of books and papers in electronic mode, including at a place outside India, if any, is kept in servers physically located in India on a daily basis | Proviso to rule 3(5) |
| Annual intimation | At the time of filing the financial statement, intimate to the Registrar annually the name of the service provider, the internet protocol address of the service provider, the location of the service provider (wherever applicable) and, where the books are on cloud, the address given by the service provider | Rule 3(6)(a) to (d) |
| Provider outside India | Where the service provider is located outside India, the name and address of the person in control of the books and papers in India | Rule 3(6)(e) |
The Explanation says "electronic mode" includes "electronic form" and an "electronic record" as defined in the Information Technology Act, 2000. This article names no software products.
The audit trail: the auditor's report
Rule 11 of the Companies (Audit and Auditors) Rules, 2014 lists matters the auditor's report must also cover. Clause (g) asks whether the company, in respect of financial years commencing on or after 1 April 2022 (the wording as printed in rule 11), has used accounting software for maintaining its books of account which has a feature of recording audit trail (edit log) facility, which has been operated throughout the year for all transactions recorded in the software, which has not been tampered with, and with the audit trail preserved as per the statutory requirements for record retention. Note that the two texts name different start years, 1 April 2023 in rule 3 and 1 April 2022 in rule 11(g); both are quoted as printed in the e-book, and the notification trail should be checked. See our guide on the independent auditor's report format.
Who checks what
| Requirement | Who checks |
|---|---|
| Accessibility and storage | The Board or audit committee through its system, and any director through inspection under section 128(3) |
| Daily back-up in India | The company's management; an auditor may report on matters in rule 11 |
| Annual intimation to the Registrar | Filed by the company with the financial statement |
| Audit trail | The auditor's report under rule 11(g) |
| Retention for eight years | Section 128(5); inspection by directors |
Worked example (invented names)
Nova Foods Private Limited keeps books on a cloud accounting service whose servers are abroad. Rule 3 requires the books to remain accessible in India at all times, the back-up to be on servers physically in India daily, and, at the time of filing the financial statement, the provider's name, internet protocol address and location, the cloud address, and, because the provider is outside India, the name and address of the person in control of the books in India. If the software lets users switch off its edit log, it does not satisfy the proviso to rule 3(1), which requires that the audit trail cannot be disabled.
Common mistakes
- Taking a daily back-up, but to a server outside India only.
- Using software whose audit trail can be switched off.
- Forgetting the provider details at the time of filing the financial statement.
- Changing the place of books without filing the notice within seven days.
- Disposing of records before eight years, or deleting an edit log.
Need help with books of account compliance?
We can review your accounting software, back-up arrangements and the annual intimation, and prepare the statements for your auditor. See our books of accounts compliance service.
Key takeaways
- Electronic books must stay accessible in India at all times.
- Back-up goes on servers physically located in India daily.
- Provider details are intimated to the Registrar with each year's financial statement.
- Software must record an audit trail that cannot be disabled.
- The auditor reports on the audit trail under rule 11(g).
Read next
- Independent Auditor's Report Format for Standalone Financial Statements
- Companies Act Thresholds in One Table
- Books of Account and Statutory Registers
- Section 128: Books of Account
Disclaimer: Based on the Companies Act, 2013 in the Ministry of Corporate Affairs consolidated text (last updated 29 July 2022), the Rules as consolidated in the Ministry's e-book and the other official texts named in this article, as consulted on 3 October 2026. Later amendments, notifications, circulars, forms and fees should be checked. Formats are general drafts to be adapted to the company's articles and facts. This article is general information, not legal advice; check the official text before acting.