2025-12-23
Record Keeping Requirements: Accounting & Commercial Books
2025-12-23
Maintaining accurate accounting records and maintaining commercial books are fundamental principles of reasonable financing management and governmental regulatory compliance and are viewed as supporting a business’s credit worthiness (financial credibility) and also its legal standing (statutory compliance).
The following are key items in connection with these record-keeping requirements in relation to major laws and regulations in India with regard to record-keeping obligations outlined in the Income Tax Act, 1961:
Section 44AA of the Income Tax Act, 1961
The Income Tax Act, 1961 requires certain businesses and/or professions to maintain their accounts in a prescribed manner if they generate sufficient gross revenue i.e. exceed the amounts specified in the Income Tax Act, 1961. The specific record-keeping obligations, as defined in Section 44AA of the Income Tax Act, 1961, and Rules 6F and 6B respectively, indicate that businesses are required to comply with the provisions of the Act and maintain accurate records of their financial transactions, inventory and other allowable deductions and expenses for tax purposes.
The following information describes what types of businesses are required to maintain records as required under Section 44AA of the Income Tax Act, 1961, as well as what types of professionals must maintain books of accounts as specified in the Act, including:
Registered persons are required to keep records for compliance with the GST Act (Goods and Services Tax).
Keeping records of the following matters is required under GST Act:
The records kept must support your tax obligations and entitlements and may be requested by the GST Examiners for review.
GST records must be retained for 6 years from the end date of your annual return, which is the deadline for submitting your GST returns every year.
Commercial record keeping also includes Contract and Agreement documents, invoices, receipts and Bills, payroll records, Inventory Logbooks and Bank Reconciliation statements.
Following best practices, the systematic indexing of records along with their inclusion into accounting systems (ERP / Cloud Accounting) will ensure:
For businesses operating across jurisdictions or planning expansion into international markets such as the UAE, adopting structured digital systems aligned with professional bookkeeping services in UAE can help ensure consistency in record-keeping, regulatory readiness, and audit efficiency.
When transitioning your accounting system to digital form and/or integrating with accounting software, (for example, Tally, QuickBooks and ERP systems), the following items should be in place:
With these items in place, not only will your records comply with all rules and regulations but also provide a mechanism for auditing and recovering.
When a corporation has multiple locations, it should establish a designated primary location for maintaining its records or allow each branch to maintain its own records under a centralized authority.
Documents are categorized based upon a statutory retention period and their legal significance. For example, tax documents must be kept for a set period ( 6 years for GST, 8 years for tax reporting) before their disposal is authorized by law. Similarly, companies’ books need to be retained for eight years before being destroyed, and/or documents containing permanent records (i.e., share certificates, board resolutions, etc.) will have to maintain permanent records.
Failure to comply with the provisions of record keeping can result in significant penalties under both the Income Tax Regime and the GST System, fine assessments, and possible criminal prosecution pursuant to the Companies Act.
In addition, a company may be denied a deduction of costs incurred and may be subject to lengthy audits due to lack of sufficient or adequate supporting documentation. Another consequence associated with the inability to keep accurate records includes not being able to obtain a loan or obtain investors because the company’s financial record is not visible to the investors.
The process of keeping proper records is not only a requirement of the law but also the foundation for maintaining a corporation’s fiscal integrity, transparency, and strategic business decisions. By creating an organization that follows the regulatory requirements established by the Income Tax Act, Companies Act, and GST laws in conjunction with “best practices” for the bookkeeping of commercial businesses will create an organization that minimizes the risk of noncompliance and maximises trust from stakeholders and resiliency of the organization. For accounting firms that advise their clients, each client will require a unique customized record-keeping framework.
Under Section 44AA of the Income Tax Act, 1961, businesses whose gross revenue or profits exceed the prescribed limits and certain specified professionals such as doctors, architects, and accountants are required to maintain proper books of accounts in the manner prescribed by the Act.
Accounting records and supporting documents must be retained for a minimum of eight financial years under the Income Tax Act and Companies Act. GST-related records must be preserved for six years from the due date of filing the annual return.
Registered persons under GST are required to maintain records relating to production or manufacture of goods, receipt and supply of goods or services, stock details, input tax credit, output tax liability, tax payments, and import or export transactions.
Commercial and management records include contracts and agreements, invoices, bills and receipts, payroll records, inventory logs, and bank reconciliation statements. These records support financial accuracy, operational transparency, and regulatory compliance.
Digital record keeping improves accuracy, enables real-time access to financial data, supports audit trails, ensures secure backups, and helps businesses meet statutory requirements efficiently, especially when using ERP or cloud-based accounting systems.
Failure to maintain proper records can result in penalties, disallowance of expenses, prolonged audits, fines, and possible prosecution under the Income Tax Act, GST laws, and Companies Act. It may also impact a company’s ability to secure loans or attract investors.
With over 18 years of experience across MIS, management control, and senior finance roles, Archana Mundhra has strengthened financial systems for companies in manufacturing, trading, services, and technology. As CFO Partner at The Total CFO Management Consultancy and Director at A2R Info Solutions Pvt. Ltd., she specialises in reporting frameworks, budgeting, process optimisation, and operational discipline. She believes finance is about understanding the story behind the numbers and using it to drive better decisions.
With over 25 years in Dubai and nearly 30 years as a Chartered and Management Accountant, Hemant has extensive experience across manufacturing, services and technology sectors. He has worked with major corporate groups including Al Tayer, Saif Al Ghurair, Dhabi, and Aditya Birla. Hemant specializes in profitability and cost management, debt restructuring, contract management, and regulatory compliance, having generated approximately USD 47.5 million in savings and profit growth. A confident public speaker and Distinguished Communicator, he lives by the quote: “You get what you reward for. If you want ants to come, you put sugar on the floor” (Charlie Munger), embodying his belief that “Profit has its own intelligence.”
Archana Mundhra is a qualified Chartered Accountant with over 15 years of experience in multinational corporations. Her proficiency lies in financial planning and business intelligence. Her deep financial understanding and profound analytical skills empower her to assist management in realizing their objectives effectively.
Rinkle Jain is a qualified Chartered Accountant and Fellow Member of the Institute of Chartered Accountant of India. A results-driven Chartered Accountant with a distinguished career marked by proficiency in management, financial planning, and catalyzing overall company development.Demonstrates a unique blend of financial acumen, strategic insight, and leadership prowess, contributing significantly to organizational success.
