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.
Rule 3 of the Accounts Rules says how a company may keep its books of account in electronic mode: accessible in India at all times, retained in the original format, backed up daily on servers physically located in India, with the service provider reported to the Registrar each year and an audit trail that cannot be disabled. Rules 1, 2 and 2A are the opening and definitions rules and the form for notice of the place of books. This article states the rules as amended up to G.S.R. 357(E) dated 30 May 2025 (in force 14 July 2025) per the MCA e-book. Later amendments should be checked.
Books of account and other relevant books and papers kept in electronic mode must remain accessible in India at all times; the backup, including where books are kept at a place outside India, must be kept on servers physically located in India on a daily basis (rule 3(1) and 3(5) proviso). For financial years commencing on or after 1 April 2023, accounting software must record an audit trail of every transaction, with an edit log, and the audit trail cannot be disabled. The company intimates the service provider details to the Registrar annually with the financial statement (rule 3(6)).
Rules 1 and 2
Rule 1 gives the title, the Companies (Accounts) Rules, 2014, and says they came into force on 1 April 2014. The notification (G.S.R. 239(E), 31 March 2014) was issued under sections 128, 129(3), 133, 134, 135(4), 136(1), 137 and 138. Rule 2 defines "Act", "Annexure", "Fees" (as specified in the Registration Offices and Fees Rules), "Form" or "e-Form", "Indian Accounting standards" (the Ind AS referred to in rule 3 and the Annexure to the Companies (Indian Accounting Standards) Rules, 2015), "Schedule" and "section". Words not defined take their meaning from the Act or the Definitions Details Rules.
Rule 2A: notice of the address of books of account
For the first proviso to section 128(1), the notice regarding the address at which books of account may be kept is in Form AOC-5. The section is explained in Section 128: Books of Account.
Rule 3: books of account in electronic mode
| Sub-rule | Requirement |
|---|---|
| 3(1) | Books of account and other relevant books and papers kept in electronic mode must remain accessible in India, at all times, so as to be usable for subsequent reference |
| Proviso to 3(1) | For a financial year commencing on or after 1 April 2023, every company that uses accounting software for its books of account must use only software that has a feature of recording an audit trail of each and every transaction, creating an edit log of each change made in the books along with the date of the change, and ensuring that the audit trail cannot be disabled |
| 3(2) | The books and papers are retained completely in the format in which they were originally generated, sent or received, or in a format that presents accurately the information generated, sent or received; the information in the electronic records must remain complete and unaltered |
| 3(3) | Information received from branch offices must not be altered and must be kept so that it shows what was originally received from the branches |
| 3(4) | The information in the electronic record must be capable of being displayed in a legible form |
| 3(5) | There must be a proper system for storage, retrieval, display or printout, as the Audit Committee, if any, or the Board deems appropriate; the records must not be disposed of or rendered unusable unless permitted by law |
| Proviso to 3(5) | The backup of the books and papers kept in electronic mode, including at a place outside India, if any, must be kept in servers physically located in India on a daily basis |
| 3(6) | The company intimates to the Registrar on an annual basis, at the time of filing the financial statement: (a) the name of the service provider; (b) the internet protocol address of the service provider; (c) the location of the service provider (wherever applicable); (d) where the books are maintained on cloud, the address given by the service provider |
| Explanation to 3(6) and clause (e) | "Electronic mode" includes "electronic form" and "electronic record" as defined in the Information Technology Act, 2000; "books of account" has the meaning in the Act. Clause (e): where the service provider is located outside India, the name and address of the person in control of the books and papers in India |
The wording "accessible in India, at all times" and "daily basis" are the present text. Clause (e) appears after the Explanation in the printed rule; it belongs with the intimation list in sub-rule (6).
What the audit trail requirement means in practice
The proviso to rule 3(1) speaks to the software, not the auditor: every company that uses accounting software must use only software that (1) records an audit trail of each and every transaction, (2) creates an edit log of each change, with the date of the change, and (3) ensures that the audit trail cannot be disabled. Its date is "financial year commencing on or after the 1st day of April, 2023". The auditor's reporting on this feature is in rule 11(g) of the Audit and Auditors Rules; see Rules 11 and 12 of the Audit and Auditors Rules. For a detailed discussion of the backup, accessibility and audit trail, read Electronic Books of Account: Daily Backup on Servers in India, Accessibility, the Annual Intimation and the Audit Trail Requirement.
Practical points
- Cloud accounting. If books are on cloud, intimate the cloud address given by the service provider (rule 3(6)(d)), and where the service provider is outside India, the name and address of the person in control of the books in India (clause (e)).
- Backups. A daily backup on a server physically located in India is required even if the primary system sits abroad.
- Branches. Information from branches is kept as received; consolidation in the head office system should not overwrite it (rule 3(3)).
- Change of software. Check, before switching software, that the new one has a non-disableable audit trail and edit log.
- Reporting. The annual intimation goes with the financial statement; see Rules 10 to 12.
A worked example
Lotus Garments Private Limited (invented) uses cloud accounting software hosted by a provider whose servers are outside India. Its books remain accessible in India at all times. A daily backup is kept on a server physically located in India. When it files its financial statement for a year commencing on or after 1 April 2023, it intimates the Registrar of the provider's name, internet protocol address, location and cloud address and, because the provider is outside India, the name and address of the person in control of the books in India. Its software records an edit log of every change, with dates, and the audit trail cannot be switched off. Our books of accounts compliance service can assess whether a company's software and backup arrangements meet these points.
Need help with electronic books and the audit trail?
Many companies discover only at audit that their software cannot hold an audit trail, or that the backup is not on an Indian server. We can review your accounting setup against rule 3, prepare the annual intimation and document the controls through our books of accounts compliance service. The following rules on directors' access, forms and consolidation are in Rules 4 to 7.
Key takeaways
- Electronic books must be accessible in India at all times.
- Backup on servers physically located in India, daily, even where books are kept outside India.
- Accounting software must have a non-disableable audit trail with an edit log for financial years commencing on or after 1 April 2023.
- Annual intimation of service provider details with the financial statement.
- Form AOC-5 is for the notice of another place of books under section 128(1).
Read next
- Electronic Books of Account: Daily Backup on Servers in India and the Audit Trail
- Section 128: Books of Account
- Rules 4 to 7: directors' access, forms and consolidation
- Rules 11 and 12 of the Audit and Auditors Rules: audit trail reporting
Disclaimer: Based on the Companies Act, 2013 rules (and the Companies (Auditor's Report) Order, 2020) named above as consolidated in the MCA e-book (consulted on 3 October 2026), with the later notifications the article names. Later amendments, fees, forms and the Companies Act, 2013 provisions referred to should be checked. This article is general information, not legal advice; check the official text before acting.