The Ministry of Corporate Affairs is considering a major compliance relief for micro-enterprises by exempting companies with annual turnover up to Rs 1 crore from mandatory statutory audits, the Economics Times reported.
The proposal, likely to be introduced through an amendment to Section 139 of the Companies Act during the Winter Session, marks the first significant rethink of audit requirements since the Act's overhaul, the report added.
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Citing an official involved in the discussions ET reported that audits of micro-enter “rarely reveal material issues and add limited practical value,” these audits increase compliance cost the report said.
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Under the current law, statutory audit forms the basis for preparing financial statements, conducting annual general meeting and filing documents such as AOC-4 with the Registrar of Companies. The audit requirement applies uniformly to one-person companies, small companies and closely held private firms.
A former president of the Institute of Chartered Accountants of India told ET that extending the Rs 1 crore turnover threshold which already applies to tax-audit exemption under the Income-tax Act could create a compliance vacuum.
He added that removing statutory audit for micro-firms may reduce visibility on accounting accuracy and weaken compliance discipline at the lower end of the corporate sector.
The proposal remains under active consideration, with the draft amendment expected to draw significant attention once introduced in the Winter Session of Parliament, ET said.
Earlier, India's leading micro, small, and medium enterprises bodies highlighted alternate financing and enhancing the competitiveness in their pre-Budget recommendations to finance minister Nirmala Sitharaman for the upcoming Budget 2026, sources told NDTV Profit.
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