Bookkeeping for Small Business: Rules, Tally vs Zoho

Many small businesses treat accounting as a once-a-year event: hand the bank statements to the CA in July and hope for the best. That approach costs more than it saves. Without monthly books, you can’t file GST correctly, you miss TDS, you can’t tell which product or client is actually profitable, and you have nothing to show a bank when you need a loan. This guide covers what the law requires and what good practice looks like.

What the law requires

Income-tax Act (section 44AA, carried into the 2025 Act)

Specified professionals (lawyers, doctors, CAs, engineers, architects, interior decorators, film artists, company secretaries, and IT professionals as notified) must keep books if gross receipts exceeded ₹1,50,000 in each of the past three years. Rule 6F prescribes the books: cash book, journal, ledger, copies of bills above ₹25, and so on.
Other businesses and professions must keep books if income exceeds ₹2,50,000 or turnover/receipts exceed ₹25 lakh in any of the three preceding years (individuals and HUFs), or if they declare income below the presumptive rate.
Retention: generally 6 years from the end of the relevant year, longer if an assessment is pending.

GST (section 35 and Rule 56)

Every registered person must keep accounts at the principal place of business of:

production or manufacture, inward and outward supplies
stock of goods
input tax credit availed
output tax payable and paid

Retention: 72 months (6 years) from the due date of the annual return for that year (section 36).

Companies Act (section 128)

Books on an accrual basis and double-entry system, kept at the registered office (or another place approved by the board).
Audit trail (edit log): from 1 April 2023, accounting software must record every change, and this can’t be disabled.
If books are kept electronically, a backup on servers in India must be taken daily.
Retention: 8 years.

Why monthly bookkeeping pays for itself

GST accuracy: GSTR-1 and GSTR-3B come straight from your books, and GSTR-2B reconciliation is only possible if purchases are recorded monthly.
TDS on time: vendor payments are classified and TDS is deducted by the 7th. No surprises at year end.
Cash flow visibility: debtor ageing, creditor schedules and cash forecasts need up-to-date books.
Loans and credit: banks ask for provisional financials, stock statements and CMA data.
Faster year-end: audits and ITRs take days, not weeks.
Notices: when the department asks a question, you have the answer and the evidence.

A monthly bookkeeping checklist

Record all sales invoices and purchase bills (with GSTIN and HSN/SAC).
Record expenses with proper vouchers. Avoid unsupported cash expenses.
Do a bank reconciliation for every account and the credit card statements.
Reconcile cash in hand (count it).
Classify TDS on vendor payments and record deductions.
Reconcile GSTR-2B vs purchase register, and follow up on missing invoices.
Update debtor and creditor ageing, and send reminders.
Record payroll, PF, ESI and professional tax.
Review fixed asset additions.
Produce a monthly P&L and balance sheet (even a simple one) and compare it with the budget.

Tally Prime vs Zoho Books

	Tally Prime	Zoho Books
Type	Desktop (cloud access through TallyPrime Server, AWS or remote options)	Cloud-native (browser and mobile apps)
Strengths	Inventory, manufacturing, multi-godown, strong GST and TDS modules, used by most Indian CAs	Easy interface, bank feeds, online invoicing and payment links, integrates with other Zoho apps
Best for	Traders, manufacturers, inventory-heavy businesses	Service businesses, startups, freelancers, remote teams
Pricing	One-time licence (single or multi-user), plus a renewal for updates	Monthly or annual subscription by plan
Audit trail	Edit log available (enable it in company features)	Built in

Both are GST-compliant and support e-invoicing and e-way bills. Choose based on how you work: inventory and offline → Tally; services and cloud → Zoho. Either way, what matters most is regular, accurate data entry.

What does outsourced bookkeeping cost?

Fees depend on transaction volume, GST and TDS work, payroll, inventory and how often you want reports. A simple service business with a few hundred transactions a month costs much less than a trading business with inventory and multiple GSTINs. Ask for a written scope: number of entries, reconciliations included, reports and turnaround time.

Frequently asked questions

I’m a freelancer on the presumptive scheme. Do I need books?
Under 44ADA, if you declare at least 50% profit, detailed books aren’t mandatory. Keep bank statements, invoices and expense records anyway. They are needed for GST, advance tax and any notice.

Can I keep books in Excel?
For a small proprietorship, Excel can meet the basic income-tax requirement. But companies need software with an audit trail, and GST reconciliation is far easier in accounting software.

How long should I keep old records?
At least 8 years to be safe across income tax (6 years and more if reopened), GST (72 months from the annual return due date) and the Companies Act (8 years).

Want your books kept monthly, not just at year end? Garvita Jain & Co. offers outsourced bookkeeping in Tally or Zoho Books, with monthly GST and TDS reconciliations and management reports. Contact us here, or at contact@garvitajainandco.com or +91 98678 16597.

This article is general information based on the law as of November 2026 and is not professional advice.

Sources

Official

Professional / CA publications

Why Bookkeeping Matters: Monthly Accounting for Small Businesses