MCA to Exempt Companies with Turnover up to Rs. 1 Crore from Statutory Audit, Aims to Ease Compliance Burden
It is anticipated that the proposed modification will increase the turnover level for required audits.
The Ministry of Corporate Affairs (MCA) is about to exclude enterprises with an annual revenue of up to Rs. 1 crore from the necessary statutory audit obligation, a major step toward clearing the regulatory framework for small businesses. As part of a larger government initiative to improve the "ease of doing business" and lower compliance costs for Micro, Small, and Medium Enterprises (MSMEs), the decision is anticipated to be formalized by an impending modification to the Companies Act, 2013.
The majority of businesses are currently required by Section 139 of the Companies Act, 2013 to have a practicing chartered accountant audit their financial accounts annually. Although this procedure guarantees corporate governance and transparency, it frequently poses a substantial financial and administrative burden for micro and small businesses, taking resources away from their primary business operations.
The smallest companies in the corporate sector are praising the proposed exemption as a game-changer. Speaking on condition of anonymity, a top MCA official said, "Our goal is to give real relief to the smallest players in the corporate ecosystem." For a business with a revenue of, say, Rs. 80 lakh, the cost of compliance may be disproportionately high. By making this change, they will have more time and resources to concentrate on innovation and growth rather than bureaucratic bureaucracy.
Industry organizations that represent small firms have largely approved of the announcement. FISME, the Federation of Indian Micro and Small & Medium Enterprises, referred to it as a "long-pending and much-welcome reform." "The cost of a statutory audit, while nominal for larger firms, is a significant burden for micro-enterprises," a representative stated. By streamlining their yearly compliance cycle, the MCA's direct intervention will boost their competitiveness in addition to their bottom line.
But the financial and accounting community has also reacted cautiously to the decision. Although the intention is admirable, some experts contend that the exemption puts more pressure on businesses to uphold strong internal financial discipline. "Without the external scrutiny of an audit, there's a heightened risk of financial mismanagement or non-compliance with other statutes, like GST and income tax, going unnoticed," said a chartered accountant based in Delhi. "The government may need to strengthen other monitoring mechanisms to ensure financial integrity isn't compromised."
It is anticipated that the proposed modification will increase the turnover level for required audits. Nowadays, the majority of businesses need an audit, with the exception of those One-Person Companies (OPCs) with revenue under Rs. 40 lakh. Private limited corporations will be subject to the new regulation, which could have an effect on hundreds of thousands of enterprises nationwide. The formal announcement is expected to be made in the upcoming weeks and will probably take effect for the upcoming fiscal year.
For India's smallest corporate citizens, the MCA's plan essentially represents a turning point toward a less invasive and more trust-based regulatory framework. The ability of these newly exempted enterprises to maintain financial integrity on their own will determine if the measure is ultimately successful, even though it is being hailed as a significant step towards simplification.
Support our journalism by subscribing to Taxscanpremium. Follow us on Telegram for quick updates
