Why Statutory Audit Applicability Confuses Indian Businesses
Statutory audit is one of the most misunderstood compliance requirements in India.
Many businesses receive audit-related notices not due to tax evasion, but due to
incorrect assumptions about applicability thresholds.
Shunyatax Global says that…
Audit non-compliance mostly arises from lack of clarity, not intent.
What Is a Statutory Audit?
A statutory audit is a mandatory audit prescribed by law
to verify the correctness of books of accounts and compliance
with the Income-tax Act and related regulations.
Applicability depends on:
- Entity type
- Turnover / gross receipts
- Cash transaction ratio
—not on profit.
Statutory Audit Applicability – Key Rules
1. Businesses (Proprietorship / Partnership / Firm)
- Audit required if turnover exceeds ₹1 crore
- Threshold increases to ₹10 crore if:
- Cash receipts ≤ 5% of total receipts, and
- Cash payments ≤ 5% of total payments
2. Professionals
- Audit required if gross receipts exceed ₹50 lakh
3. LLPs (Limited Liability Partnerships)
Audit applicable if:
- Turnover exceeds ₹40 lakh, or
- Capital contribution exceeds ₹25 lakh
4. Companies (Private / Public / OPC)
- Statutory audit is mandatory for all companies
- Applicable even if:
- Turnover is NIL
- No business activity is carried out
Statutory Audit Due Dates
- Audit report due: 30 September
- Tax audit cases: 30 October (Subject to extensions by authorities)
Penalty for Non-Compliance (Section 271B)
- 0.5% of turnover or gross receipts
- Maximum penalty capped at ₹1,50,000
📊 In many cases, penalty exceeds the actual audit cost.
Common Mistakes Businesses Make
- Assuming audit not required due to low profit
- Ignoring cash transaction percentage
- LLPs assuming audit is optional
- Companies believing NIL turnover means no audit
- Late appointment of auditors
Key Insight for Founders & Finance Teams
Statutory audit applicability is about structure and thresholds, not size.
Early clarity avoids penalties, scrutiny, and compliance stress.
Reference: Full Detailed Article
For a complete breakdown with examples:
👉 https://shunyatax.in/blogs/blogs-for-saints/statutory-audit-applicability-in-india
Professional Audit & Compliance Support
👉 https://shunyatax.in/pages/audit-services
"Compliance is cheapest when done on time." — Peter Drucker
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