Annual Audit Requirements for Indian SMEs: Do You Need One?

Several audits, several different laws

Indian business owners hear the word audit used for several different things. There is the statutory audit of companies under the Companies Act, 2013, the audit of LLPs under LLP law, the tax audit under the Income-tax Act, and internal audit, which is mostly voluntary. GST no longer has a separate mandatory audit, although larger taxpayers still file a reconciliation statement.

Each has its own trigger, report and due date, and one business can need more than one. A private limited company with turnover above the tax audit limit, for example, needs both a statutory audit and a tax audit in the same year.

Statutory and tax audit reports must be signed by a practising Chartered Accountant. Your accountant prepares the books, reconciliations and schedules. The auditor tests them independently and gives the opinion.

Companies: statutory audit every year

Every company registered under the Companies Act, 2013 must have its financial statements audited each year, whatever its size. This includes one person companies, dormant companies and private companies with no revenue. There is no turnover exemption.

The board appoints the first auditor within 30 days of incorporation. After that, shareholders appoint the auditor at the annual general meeting (AGM), usually for five years, and the company files Form ADT-1. Since 1 April 2023, companies must use accounting software that keeps an audit trail (edit log) of every change, and the auditor reports on it.

With a 31 March year end, the AGM must be held by 30 September. The key MCA filings after it are:

• AOC-4 (financial statements): within 30 days of the AGM
• MGT-7 or MGT-7A (annual return): within 60 days of the AGM
• ADT-1 (auditor appointment): within 15 days of the AGM
• One person companies: AOC-4 within 180 days of the year end
• Late filing: additional fee of ₹100 per day per form

LLPs: audit above the limits

An LLP needs its accounts audited by a Chartered Accountant if its turnover exceeds ₹40 lakh or partners' contribution exceeds ₹25 lakh in the financial year. Below both limits, the designated partners can sign the accounts themselves.

The statement of accounts and solvency is filed in Form 8 by 30 October, and the annual return in Form 11 by 30 May. An LLP whose accounts are audited under the LLP Act counts as a person whose accounts must be audited under another law, so its income tax return follows the later audit-case due date.

If the LLP also crosses the tax audit threshold, it needs a tax audit report too. The same Chartered Accountant often handles both, but they are separate reports with separate due dates.

Tax audit under the Income-tax Act

A tax audit checks your books and reports a long list of tax particulars. It was section 44AB of the 1961 Act and is section 63 of the Income-tax Act, 2025 from tax year 2026-27. It applies to proprietors, firms, LLPs and companies alike.

For FY 2025-26 the report is filed in Form 3CA-3CD (where accounts are audited under another law) or Form 3CB-3CD. The normal due date is 30 September, a month before the 31 October return date. On 28 September 2026 CBDT announced extensions to 21 October and 21 November 2026 for this year. From tax year 2026-27, a single Form 26 replaces the three forms. A tax audit applies when:

• Business turnover exceeds ₹1 crore
• The limit rises to ₹10 crore if cash receipts and cash payments are each no more than 5% of the total
• Professional receipts exceed ₹50 lakh
• A presumptive taxpayer declares profit below the presumptive rate and income exceeds the exemption limit

GST: from audit to self-certification

In the early years of GST, larger taxpayers needed a GST audit by a Chartered Accountant or Cost Accountant, who certified the reconciliation statement in Form GSTR-9C. The Finance Act, 2021 removed that requirement from 1 August 2021, and from FY 2020-21 onwards GSTR-9C is self-certified by the taxpayer.

Today, businesses with aggregate turnover above ₹5 crore file GSTR-9C along with the annual return GSTR-9 by 31 December after the year ends. GSTR-9 is optional for turnover up to ₹2 crore.

Self-certification does not mean less scrutiny. The statement reconciles your audited accounts with your GST returns, and any unexplained difference in turnover, tax or input tax credit is visible to the department. Additional tax found during reconciliation is paid through Form DRC-03. Many businesses still have a professional prepare and review it.

Internal audit and choosing an auditor

Internal audit is mandatory only for larger companies. A private company must appoint an internal auditor if, in the previous year, its turnover was ₹200 crore or more or its outstanding borrowings from banks or public financial institutions exceeded ₹100 crore. Listed companies and certain unlisted public companies are also covered. For most SMEs it is voluntary, but a periodic review of purchases, payroll, stock, input tax credit and bank reconciliations catches errors and leakages before the statutory auditor or a tax officer does.

When choosing a statutory or tax auditor, look for a practising Chartered Accountant firm with experience in your industry and the capacity to finish before your due dates. Check independence rules too, because the law limits which other services a company's statutory auditor may provide to it. Appoint early rather than in September.

Getting audit-ready

Most audit delays come from books that were never closed properly during the year. If reconciliations are done monthly, the year-end audit becomes a review rather than a rebuilding exercise, and it produces fewer qualifications.

Start the year-end work in April, not after the due dates are announced. Agree a timeline with your auditor, share a list of open items early, and keep one person responsible for answering queries. A practical checklist:

• Reconcile bank, GST and TDS records every month
• Keep supporting documents for every material transaction
• Maintain fixed asset and stock records with year-end counts
• Confirm balances with major customers, suppliers and related parties
• Match GST returns and TDS statements to the books before the audit