FCS Deepak Pratap Singh
As you are aware that the MCA has amended Rule 3 of the Companies (Accounts) Rules, 2014 through Circular dated 11th August, 2022.
RULE 3 OF COMPANIES (ACCOUNTS) RULE 2014
MANNER OF BOOKS OF ACCOUNT TO BE KEPT IN ELECTRONIC MODE
(1) The books of account and other relevant books and papers maintained in electronic mode shall remain accessible in India, at all times * so as to be usable for subsequent reference. [* amended through Circular dated 11/08/2022].
PROVIDED THAT for the financial year commencing on or after the 1st day of April, 2023 , every company which uses accounting software for maintaining its books of account, shall use only such accounting software which has a feature of recording audit trail of each and every transaction, creating an edit log of each change made in books of account along with the date when such changes were made and ensuring that the audit trail cannot be disabled.
(2) The books of account and other relevant books and papers referred to in sub-rule (1) shall 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 and the information contained in the electronic records shall remain complete and unaltered.
(3) The information received from branch offices shall not be altered and shall be kept in a manner where it shall depict what was originally received from the branches.
(4) The information in the electronic record of the document shall be capable of being displayed in a legible form.
(5) 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 and such records shall not be disposed of or rendered unusable, unless permitted by law:
Provided that 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 daily basis **.[** amended through Circular dated 11/08/2022].
(6) 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.
(e) where the service provider is located outside India, the name and address of the person in control of the books of account and other books and papers in India.
Explanation.- For the purposes of this rule, the expression “electronic mode” includes “electronic form” as defined in clause (r) of sub-section (1) of section 2 of Information Technology Act, 2000 (21 of 2000) and also includes an electronic record as defined in clause (t) of sub-section (1) of section 2 of the Information Technology Act, 2000 (21 of 2000) and “books of account ” shall have the meaning assigned to it under the Act.
LET'S ANALYSE
1. The amendment says that if books of account are kept in electronic form , then business entity mandatorily to take backup on server situated in India with the business entity on daily basis.
2. If books of account of an entity is maintained by CA/Tax Consultants etc., then such business entity should received accounts details from CA/Tax Consultants on daily basis and keep in the server or computer system maintained by it.
3. If books of accounts of an entity is maintained by a foreign service provider not having place of establishment in India, then name and address of person ,in whose control books of account are kept in India should be disclosed with the ROC.
4. The business entity or company is required to intimate the ROC at the time of filing financial statement following details;e provider is located outside India, the name and address of the person in control of the books of account and other books and papers in India.
(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.
(e) where the service
5. Rule 3 of Companies (Accounts) Rule 2014 ,MCA has recently added a proviso stating that accounting software used by the Companies should have a feature of recording audit trail of every transaction i.e, create and edit log of each change made in the books of accounts along with the date when such changes were made and ensuring that the audit trail cannot be disabled. The applicability of the proviso is effective from 1 April 2021( same has been extended to 1st April,2023).
DISCLAIMER: The article presented here is only for sharing information with readers. The views are personal and should not be considered as a professional advice. The article has been prepared on the basis of available information at various forums and author has taken all steps to share correct information with readers. In case of necessity do consult with professionals.
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