Extension of one year to use accounting software by company in India

Having heard a digitalisation trend implementation, it is breaking news for company in India. Now companies in india will have one year time to implement accounting software solution that provides an audit trail log of each and every transaction edit.

On 1st April 2021, MCA has notified this extension where company should be using an accounting software mandatorily for bookkeeping record deferred from 1st April 2022, that must provide an audit-trail and log of any manipulation of transaction records.

If we look at background intend of this change, the changes directed by rule to use of accounting software by companies in India are for better reason. It provides a transparency in the record and better audit trail. Already similar initiative taken by different countries' Govt in past such as; UK had launched MTD (Making Tax Digital) projects in various phases to be implemented the digitalisation of transactions for Companies, Self Employed, Landlord including Sales, VAT, full accounting and tax return data where various software are approved by Govt to follow strict function guidelines. After switching, a change log enabled in transaction that triggers a reports with an exceptions file for any manipulated data within book-keeping records.

What are the implications and advantages?

There are following advantages to use accounting software by company in India.

• Transparency of accounting transactions
• Well informed and reliable data
• Chances of manipulations will reduce
• Less effort in auditing the record
• Investor friendly
• Better financing decision by bank or institution for credit application by business

Now let's understand what are implications or challenges to this implementation:

• Software company to address a proper way of adjustments where there are genuine correction of records
• Some of Auditors are not equipped with using advance level of software or tools that provides audit trail of changes in log
• Small businesses will get a higher hit in expenses to use licenses of software usage per person
• Still, most of software companies in India have lack of those functionality enabled where each transactions are set to report change log, where strict change control by admin need to be enabled

Considering this above challenges, various stakeholders expressing their inability to make changes in accounting software in a short span of time. Hence Government decided to give another year to find a proper solution where an additionl control can be enabled where transactions are not manipulated.

What GoTaxfile can do for you:

We are team of Chartered Accountant, Finance transformation consultant and Technology advisor. We are certified pro-advisor and already using known accounting software such as QuickBooks, Xero, ZohoBooks for our clients that meets most of provision of rule and we are ready to work with developers, technology company and small & medium business sectors to provide an robust advisory solution to meet changes in accounting softwares. Schedule a call with our team now!