India Mulls Exempting Micro Firms Up To Rs 1 Crore From Statutory Audits

(MENAFN- KNN India) New Delhi, Mar 19 (KNN) The government is considering a proposal to exempt companies with annual turnover of up to Rs 1 crore from mandatory statutory audits under the Companies Act, as part of efforts to reduce compliance burden on micro businesses.

Currently, all companies, irrespective of size, are required to undergo annual statutory audits. The proposal aims to align this requirement with existing tax audit rules, where firms below Rs 1 crore turnover are already exempt under Section 44AB of the Income Tax Act.

The move is being considered primarily to reduce compliance costs for micro enterprises and improve ease of doing business. For very small firms, statutory audits often provide limited practical value relative to the cost and administrative burden involved.

However, concerns have been raised by stakeholders regarding the potential risks associated with such an exemption. Experts caution that it could weaken regulatory oversight, create gaps in financial monitoring, and increase the possibility of misuse, including the rise of shell companies. The absence of both statutory and tax audits for small firms may also reduce transparency and accountability in financial reporting.

At present, the proposal remains under review, and the government may modify or reconsider it in light of concerns related to monitoring challenges and potential misuse.

(KNN Bureau)

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