Accounting software in India: what it must do and how to choose
Ledgers, GST input tax credit and GSTR-2B matching, TDS, bank reconciliation and the audit trail rule, with a checklist for choosing, from the team building ERPStack.
Last updated 21 October 2026
What should accounting software in India do?
Accounting software for an Indian business keeps double-entry ledgers and links them to GST: it posts output tax from sales, tracks input tax credit and matches purchases against GSTR-2B, prepares GSTR-1 and GSTR-3B data, records TDS and TCS, and reconciles bank accounts. Companies must also use software that keeps an edit log that cannot be disabled.
Where ERPStack is today
ERPStack is in development. It is not yet available to download or buy, and the features on this page are planned, not shipped.
Sign upWhat must accounting software do for an Indian business?
The basics are the same everywhere: a chart of accounts, double-entry vouchers and financial statements. What makes software fit for India is how closely those ledgers are tied to GST and TDS, so that returns come out of the books rather than out of a separate spreadsheet.
| Feature | What it should do | Why it matters |
|---|---|---|
| Double-entry ledgers | Every voucher posts equal debits and credits to a chart of accounts | Trial balance, profit and loss and balance sheet come straight from the books |
| GST on sales | Posts output CGST, SGST or IGST from each invoice | GSTR-1 and GSTR-3B figures agree with the ledgers |
| Input tax credit | Tracks GST on each purchase and matches it against GSTR-2B | Credit depends on the supplier having reported the invoice |
| TDS and TCS | Records tax deducted or collected by party and payment type | Returns and certificates can be prepared from the books |
| E-invoicing link | Gets the IRN and QR code for B2B invoices where e-invoicing applies | No re-keying of invoices into the portal |
| Bank reconciliation | Matches bank statement lines to receipts and payments | Finds missed entries, bank charges and duplicate payments |
| Multiple GSTINs | Keeps GST ledgers and return data separately for each registration | A business registers in every state where it is liable |
| Audit trail | Logs every change with its date, and the log cannot be switched off | Required of companies; GST rules also require a log of edits |
Registration is state by state: a person liable to register must apply in every state or union territory in which they are liable, under Section 25 of the CGST Act. Software that treats each GSTIN as its own set of tax ledgers, inside one company’s books, avoids mixing up returns. For the e-invoicing side, see e-invoice software.
How should accounting software handle GST input tax credit?
You can only take credit for an invoice once your supplier has reported it in their outward supplies statement and it has been communicated to you, under Section 16(2)(aa) of the CGST Act. Rule 36(4) ties that to the supplier’s GSTR-1 (or GSTR-1A, or the invoice furnishing facility) and to your FORM GSTR-2B, the monthly auto-generated statement of input tax credit described in Rule 60(7).
So the useful job for software is matching: importing GSTR-2B and comparing it, invoice by invoice, with the purchases in your books.
| Match result | What it usually means | What to do |
|---|---|---|
| Matched | Supplier reported the invoice as you recorded it | Take the credit in GSTR-3B |
| In your books, not in GSTR-2B | Supplier has not reported it yet, or reported it late | Hold the credit and follow up with the supplier |
| In GSTR-2B, not in your books | A purchase entry is missing, or the invoice is not yours | Check with the supplier before recording it |
| Amounts differ | A typing error, or a credit or debit note not yet recorded | Correct the entry or ask for a corrected document |
Section 16 also sets two time limits that software should warn you about:
- If you do not pay the supplier the value and tax within 180 days of the invoice date, an amount equal to the credit taken has to be paid back with interest; you can take the credit again once you pay.
- Credit for an invoice cannot be taken after 30 November following the end of the financial year it relates to, or after you file the annual return, whichever is earlier (Section 16(4)).
What does the audit trail rule require of accounting software?
A proviso to Rule 3(1) of the Companies (Accounts) Rules, 2014, inserted by G.S.R. 205(E) of 24 March 2021, says every company that keeps its books in accounting software must use software that records an audit trail of each transaction, creates an edit log of each change with the date it was made, and ensures the audit trail cannot be disabled. After two deferrals it applies from the financial year starting 1 April 2023, and auditors now report on it under Rule 11(g) of the Companies (Audit and Auditors) Rules, 2014 (ICAI explainer).
| Rule | Who it covers | What the software must keep |
|---|---|---|
| Companies (Accounts) Rules, Rule 3(1) proviso | Every company using accounting software | Audit trail of each transaction and a dated edit log that cannot be disabled |
| CGST Rule 56(8) | Every GST-registered person keeping records electronically | A log of every entry edited or deleted |
| CGST Section 36 | Every GST-registered person | Books and records for 72 months from the due date of the annual return for that year |
When you assess software, ask the vendor to show you the edit log for a changed invoice, and to confirm in writing that no user, including an administrator, can turn it off.
How do you choose accounting software in India?
| Question to ask | What a good answer looks like |
|---|---|
| Is GST posted automatically? | Output and input tax go to the right ledgers from each invoice and bill |
| Can it match GSTR-2B? | Import, invoice-level matching and a list of mismatches to follow up |
| Does it prepare GSTR-1 and GSTR-3B data? | Figures come from the books, with a reconciliation view |
| Is there an audit trail that cannot be disabled? | A dated edit log for every voucher, visible to your auditor |
| Does it handle several GSTINs? | Separate tax ledgers and return data per registration, one set of books |
| How does bank reconciliation work? | Statement import with suggested matches, not manual ticking |
| Can your accountant work in it? | A separate login with the right access, without sharing passwords |
| Can you get your data out? | Full export of ledgers, vouchers and masters in open formats |
Should you choose desktop or cloud accounting software?
| Desktop accounting software | Cloud accounting software | |
|---|---|---|
| Where the data lives | On your computer or office server | On the vendor’s or your hosting provider’s servers |
| Access | From the machines where it is installed, unless you set up remote access | From any browser, with user logins |
| Working with an accountant | Usually by sending backup files back and forth | The accountant logs in to the same books |
| Backups | Your responsibility | Usually handled by the provider; check how and how often |
| Statutory updates | Installed by you when released | Applied by the provider |
| Internet dependence | Works offline | Needs a connection to work |
Desktop software suits a single office with one bookkeeper. Cloud software suits businesses with more than one location, a remote accountant, or sales and purchase entries made by different people. Either way, check that the audit trail and GST features above are present, because they matter more than where the software runs.
How will ERPStack handle accounting?
ERPStack is an ERP for Indian small and mid-sized businesses that Perimattic is building. Accounting is planned as the module every other module posts into:
- Ledgers posted directly from sales invoices, purchase bills, stock movements and payroll.
- GSTR-2B import and invoice-level matching, with a follow-up list for mismatches.
- GSTR-1 and GSTR-3B data prepared from the books, for each GSTIN.
- An edit log on every voucher that cannot be switched off.
- Bank statement import and reconciliation.
Status: ERPStack is in development and none of this is available to use yet. The accounting module is planned, not shipped. Sign up to tell us how your books are kept today.
This page is general guidance, not tax, legal or accounting advice. The rules cited were checked on 22 October 2026.
More from the ERPStack modules
Accounting software, answered
What is GST accounting software?
It is accounting software that records GST in the same ledgers as the rest of your books. Output tax is posted from each sales invoice, input tax from each purchase, and the software matches purchases against GSTR-2B and prepares the figures for GSTR-1 and GSTR-3B, so returns agree with the accounts.
Does the audit trail rule apply to small companies?
The proviso to Rule 3(1) of the Companies (Accounts) Rules, 2014 applies to every company that keeps its books in accounting software, without a size exemption in its wording. Sole proprietors and partnerships are not companies, but if they are registered under GST and keep records electronically, CGST Rule 56(8) separately requires a log of every entry edited or deleted.
Can a small business keep its accounts in spreadsheets?
It can, but spreadsheets do not keep a reliable log of edited or deleted entries, do not post GST automatically and make GSTR-2B matching a manual job every month. Once you have regular purchases with input tax credit, or more than one GSTIN, accounting software usually saves more time than it costs to set up.
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