An audit is compulsory in India when a law governing the organisation requires it, or when its income, turnover or other activities cross a prescribed threshold. There is no single audit rule that applies to every organisation.
A small private company, for example, generally needs an annual statutory audit even if it has little turnover. A sole proprietor does not become liable for a tax audit merely by starting a business. An LLP, charitable trust or registered society must be assessed under the rules that apply to it.
The distinction matters as businesses prepare accounts for financial year 2025–26 and review their obligations for the tax year beginning April 2026.
Every company must arrange a statutory audit
Under the Companies Act, 2013, every company must appoint an auditor. This includes private companies, public companies, one-person companies and Section 8 companies. The requirement does not depend on the company crossing a minimum turnover or profit threshold. An inactive company should not assume that having no sales removes its audit obligation.
A company may also face additional audit requirements. Internal audit and cost audit apply to specified classes of companies under separate conditions; they are not automatically required of every company. An annual statutory audit therefore should not be confused with a tax, internal or cost audit.
When does an LLP need an audit?
For an LLP, the commonly applicable threshold is turnover exceeding ₹40 lakh or partners’ contribution exceeding ₹25 lakh. The Ministry of Corporate Affairs’ instructions for LLP Form 8 require auditor certification when either threshold is exceeded. The word “or” is significant: crossing either limit calls for an audit assessment. An LLP below both limits may still need a tax audit if it independently meets income-tax conditions.
Tax audit depends on activity and thresholds
A tax audit applies to a person carrying on business or profession, regardless of whether that person operates as a proprietorship, partnership, LLP or company.
For financial year 2025–26, Section 44AB of the Income-tax Act, 1961 is the relevant provision. In general, a business tax audit is required when sales, turnover or gross receipts exceed ₹1 crore. That limit can rise to ₹10 crore where cash receipts and cash payments each remain within the prescribed 5% limit. For a profession, the general gross-receipts threshold is ₹50 lakh. Presumptive-taxation provisions can change the outcome, so turnover alone is not always the full test.
The applicable income-tax law changes with the period being audited. The Income-tax Act, 2025 uses Section 63 for tax audit from the new tax year beginning 1 April 2026. Organisations should use Section 44AB when examining FY 2025–26 and the corresponding provisions of the 2025 Act when examining tax year 2026–27.
A company that needs both a statutory audit and a tax audit must also meet the tax-audit reporting requirements. Having company accounts audited does not, by itself, dispense with the prescribed income-tax report.
What about charitable trusts, societies and NGOs?
A charitable or religious trust claiming income-tax exemption may have to get its accounts audited when its income, calculated before applying the relevant exemption, exceeds the applicable basic exemption limit. The requirement and prescribed report depend on the exemption provision and the tax year. The mere fact that an organisation calls itself an NGO does not establish that every possible audit applies to it.
A registered society or cooperative society must also check the law under which it is registered, including applicable state rules. Its registration-law audit and any income-tax audit are separate questions. A society structured as a Section 8 company, however, falls under the company statutory-audit rule.
Does GST registration make an audit compulsory?
GST registration alone does not require an annual audit by a chartered accountant. For taxpayers covered by the relevant turnover rule, Form GSTR-9C is a self-certified reconciliation statement; the rule refers to aggregate turnover exceeding ₹5 crore. Filing that statement should not be described as a mandatory CA-certified GST audit.
Audit requirements at a glance
| Organisation or activity | General position |
| Company, including a private, one-person or Section 8 company | Annual statutory audit required |
| LLP | Audit assessment required if turnover exceeds ₹40 lakh or contribution exceeds ₹25 lakh; tax audit may apply separately |
| Sole proprietorship or ordinary partnership | No company-law statutory audit merely because it exists; tax audit applies when relevant conditions are met |
| Business subject to income-tax audit | Generally above ₹1 crore turnover, potentially ₹10 crore when both prescribed cash limits are met |
| Profession subject to income-tax audit | Generally above ₹50 lakh gross receipts, subject to applicable presumptive-tax rules |
| Charitable trust or NGO | Depends on its legal form, exemption claim, income and governing registration law |
| GST-registered organisation | GST registration alone does not trigger a CA-certified annual GST audit |
The practical first step is to identify the organisation’s legal form. It must then check its business or professional receipts, LLP contribution where relevant, charitable exemption position and any sector-specific rules. Those facts determine which audit is compulsory—and under which law.
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