India Company Mandate: What Multinational Corporations Need to Know About the Companies Act, 2013 and the Income Tax Act, 2025

For a company using SAP and its books of account and financial records hosted outside India, downloading a copy of the data to an Indian server is not enough. The compliance requirement is broader. Electronic records need to remain accessible in India, audit trails must be maintained and backups must be stored on servers physically located in India. This is the India Company Mandate and it is a requirement governed by Section 128 of the Companies Act, 2013 and the electronic record requirement under the Income Tax Act, 2025 and Income Tax Rules, 2026.

What Does Section 128 of the Companies Act Require?

Section 128 of the Companies Act, 2013 requires companies to maintain books of account that provide a true and fair view of the company’s affairs.

For electronic records, Rule 3 of the Companies (Accounts) Rules, 2014 adds important requirements. Electronic books and relevant records must remain accessible in India at all times. Companies using accounting software must also use software capable of recording an audit trail of transactions and changes, including the date of changes, with the audit trail not being capable of being disabled.

The rules also require electronic records to be retained in their original format, remain complete and unaltered and have an appropriate system for storage and retrieval. Daily backups must be maintained on servers physically located in India.

Does Keeping a PDF or Excel Export in India Meet the Requirement?

No. A periodic export of SAP data into Excel or PDF may create a copy but it does not reproduce the electronic books and audit trail in the required form.

What Changed With the Income Tax Act, 2025?

The Income Tax Act, 2025 replaced the Income Tax Act, 1961 from 1 April 2026. Section 62 addresses the maintenance of books of account and documents required to enable the Assessing Officer to compute taxable income. More importantly, for businesses maintaining electronic books, Rule 46(8) of the Income Tax Rules, 2026 requires specified electronic books and documents to remain accessible in India at all times and their backup to be maintained daily on servers physically located in India. This is an important consideration for multinational organizations whose Indian entities use global SAP environments. The primary SAP system may remain outside India, but the Indian company’s data needs to meet India based accessibility and backup requirements.

Why Are SAP Systems Distinct?

A global SAP system may contain data from multiple:

Company codes
Countries
Ledgers
Business units
Custom tables
Master data relationships

Copying selected files to India can create a significant gap between having data and having a usable representation of the company’s books and records. A transaction may be posted and subsequently corrected weeks or months later. Capturing the original transaction without appropriately preserving the subsequent correction and audit history can undermine the completeness of the record.

Can SAP DART Address the India Company Mandate?

SAP DART is relevant for tax related data extraction and archiving requirements, but organizations should assess if it addresses all the requirements of India data residency and daily backup, especially when moving from SAP ECC to SAP S/4HANA.

What About an In-House Solution?

An organization can build its own solution to copy or extract SAP data to India, however, the cost involves:

SAP development and SAP BASIS resources
Infrastructure setup in India
Monitoring and support
Audit trail preservation
Reconciliation
Data privacy controls

Does SLaiCE Require Data to Leave the Company’s SAP System?

No. SLaiCE operates within the SAP landscape and the data does not leave the customer’s network. SLaiCE runs on SAP tools that are designed to move data between SAP systems. This helps copy the required SAP data into the India based environment while maintaining the relevant audit and database logs.

What Should SAP Buyers Ask Before Choosing a Solution?

Before implementing an India Company Mandate solution, ask:

Is the data accessible in India at all times?
Are daily backups stored on servers physically located in India?
Are audit trails and change logs preserved?
Can the records be reproduced in the required form (not Excel or PDF)?
Can the solution handle custom tables and SAP add-ons?
Will it continue to work after SAP ECC to SAP S/4HANA migration?
How are network or infrastructure failures handled?
Can the data for a specific period be recovered when required?
Can auditors obtain the evidence they need?

These questions move the discussion from “Where is our backup?” to the more important question: “Can we demonstrate compliance?”

The Conclusion

For Indian companies using SAP, India data residency is an auditability and recoverability question. Section 128 of the Companies Act, 2013 establishes the foundation for maintaining company books and records, while the electronic record requirements under the Companies (Accounts) Rules include accessibility in India, audit trails and daily backup within India. The Income Tax Act, 2025 and Rule 46(8) add an important compliance dimension for electronic books.

For organizations operating global SAP landscapes, SLaiCE provides an approach to keeping the required Indian company data within an SAP environment based in India while maintaining auditability. It is designed to work across SAP ECC, SAP S/4HANA on-premise and SAP S/4HANA Private Cloud. SLaiCE is SAP approved and listed on the SAP Store (opens in a new tab).