Audit relief for small companies proposed: What businesses should know

A proposal in the Companies (Amendment) Bill, 2026 to relax statutory audit requirements for certain companies could reduce compliance burdens for smaller businesses, though its final impact will depend on how eligibility is defined.

The Bill proposes inserting a new Section 139(12) in the Companies Act, 2013, enabling the government to exempt specific classes of companies from the requirement to appoint statutory auditors.

Link with revised “small company” thresholds

The proposal comes alongside a plan to expand the definition of “small company” by raising the paid-up capital limit from ₹10 crore to ₹20 crore and turnover from ₹100 crore to ₹200 crore.

This could widen the pool of companies eligible for simplified compliance.

“The proposal needs to be evaluated in the context of expansion of the ‘small company’ definition,” said Zubin Billimoria, President of Bombay Chartered Accountants Society.

He added that it remains to be seen whether the same thresholds will apply for audit exemption or whether the government may prescribe lower limits for eligibility.

Expected benefits

According to Billimoria, exempting smaller companies from mandatory audits could offer multiple benefits:

• Reduction in compliance costs


• Lower administrative burden


• Alignment with existing relaxations available to small companies, such as exemptions from preparing cash flow statements


• Need for clear eligibility criteria

With the classes of companies eligible for exemption yet to be notified, Billimoria suggested that safeguards would be important to ensure the measure is appropriately targeted.

“The exemption should apply only to unlisted private limited companies meeting specified thresholds,” he said, adding that companies with listed debt, public deposits, or those operating in regulated sectors may need to be excluded.

He also noted that companies with weak compliance records or ongoing regulatory issues may not be suitable candidates for such relief.

Guardrails to limit misuse

Among the conditions that could be considered, experts point to:

• Restricting eligibility to companies without public deposits


• Excluding entities in sectors such as banking, insurance, NBFCs or those under market regulation


• Linking eligibility to demonstrable business activity, such as GST filings or employee-related contributions


• Factoring in past compliance history


• Alternative oversight mechanisms

In place of a full statutory audit, a lighter framework could be introduced for eligible companies.

Experts suggest that such firms could be required to submit self-certified financial statements signed by a director and a qualified accountant, with regulatory authorities retaining the power to review and withdraw exemptions if needed.