Books of account in electronic mode

The second proviso to section 128(1) of the Companies Act,2013 provides that "the company may keep  books of account or other relevant papers in electronic mode in such manner as may be prescribed. Thus, under the Act, it is  not  compulsory to maintain books of account or other relevant papers in electronic mode. However, if a company opts to keep books of account or other papers in electronic mode, the company must comply with the rules prescribed in this regard ie Rule 3 of the Companies(Accounts) Rules,2013

Electronic Mode
"Electronic Mode"

• includes 'electronic form' as defined in section 2(1)(r) of the Information Technology Act,2000
• and also includes 'electronic record' as defined in section 2(1)(f) of the Information Technology Act,2000

Manner in which books of account are to be kept in electronic mode
Sub-rules(1) to (5) of  Rule 3 provide as under:

• The books of account and other relevant books and papers maintained in electronic mode shall:
• remain accessible in India so as to be usable for subsequent reference.
• be retained completely:
• in the format in which they were originally generated, sent or received, or 
• in a format which shall present accurately the information generated, sent or received 

• The information contained in the electronic records shall 
• remain complete and unaltered.
•  be capable of being displayed in a legible form 

• The information received from branch offices shall:
• not be altered and 
• be kept in a manner where it shall depict what was originally received from the branches.  

• There shall be a proper system for storage, retrieval, display or printout of the electronic records as the Audit Committee, if any, or the Board may deem appropriate 
• Such records shall not be disposed of or rendered unusable, unless permitted by law. 
• The back-up of the books of account and other books and papers of the company maintained in electronic mode, including at a place outside India, if any, shall be kept in servers physically located in India on a periodic basis.

Sub-rule (6) of Rule (3) provides that the company shall intimate to the Registrar on an annual basis at the time of filing of financial statement—

  (a)  the name of the service provider;

  (b)  the internet protocol address of service provider;

  (c)  the location of the service provider (wherever applicable);

  (d)  where the books of account and other books and papers are maintained on cloud, such address as provided by the service provider.