An Indian private limited company needs a statutory audit from the day it is incorporated, even before it earns its first rupee. There is no turnover threshold. Under Section 139(1) of the Companies Act 2013, every company has to appoint an auditor at its first annual general meeting, and that auditor holds office until the close of the sixth AGM.
The rule covers private limited companies, public limited companies, one-person companies and Section 8 companies alike. A company with zero revenue is in the same position as one with INR 1,000 crore.
The auditor must be an independent practising chartered accountant or CA firm. Section 141(3) disqualifies any officer or employee of the company. Foreign parents sometimes try to use their global internal audit teams for the job, and that does not work under Indian law.
The auditor examines the balance sheet, the profit and loss account and the cash flow statement, then gives an opinion on whether they present a true and fair view under Ind AS or Indian GAAP.
Two other audits that get confused with it
Foreign companies running a subsidiary or branch in India usually meet three audits, not one. Besides the statutory audit there is a tax audit and an internal audit. Each has its own law, its own thresholds and its own penalties. All three tend to cluster in the same busy season and involve chartered accountants, which is why firms mix them up.
The tax audit applies when business turnover passes INR 1 crore. The limit rises to INR 10 crore if cash receipts and cash payments each stay at or below 5 percent of the totals. Professionals face a threshold of INR 50 lakh in gross receipts, or INR 75 lakh when 95 percent or more comes through digital or banking channels. A taxpayer who claims profits below the presumptive rate under Section 44AD or 44ADA also triggers a tax audit whatever the turnover.
The internal audit under Section 138 reaches only larger companies: turnover above INR 200 crore, or borrowings above INR 100 crore. Unlike the other two, it can be done by an employee.
LLPs sit under a lower bar. A statutory audit is mandatory once annual turnover exceeds INR 40 lakh or capital contribution exceeds INR 25 lakh.
What it costs
The statutory audit and the tax audit are separate engagements with separate reports, forms and deadlines, even when one CA firm handles both. Treating the first as covering the second is a common mistake.
Budgeting is another. A mid-size foreign subsidiary with turnover of INR 50 crore to INR 200 crore typically pays INR 3 to 8 lakh for the statutory audit, INR 1 to 3 lakh for the tax audit and INR 5 to 15 lakh for an internal audit where one applies. Missing the tax audit brings a fee under section 428(c) capped at INR 1,50,000, plus interest and late-filing charges if the return is also late.
