The Corporate Laws (Amendment) Bill, 2026 proposes a new sub-section (12) in Section 139 of the Companies Act, 2013. It would let the Government exempt prescribed classes of companies from appointing an auditor. It is a proposal, not law, and the Bill does not say which companies would qualify.
Facts checked: 16 October 2026. The timeline and the committee's recommendation below come from PRS Legislative Research. The introduction date, the 3 August 2026 report and the private-companies recommendation were re-checked on PRS's bill page and JPC summary on 17 October 2026. The clause number and the Section 139(12) reference come from secondary descriptions of the introduced Bill; PRS's bill page does not state them, so check the Bill text. We did not read the committee-amended text. As far as we can tell the Bill is still pending after the committee reported. Check the Lok Sabha bill tracker and the MCA site for anything newer before you plan around this.
What is proposed
- Clause 44 of the Bill as introduced inserts a sub-section (12) into Section 139, which deals with the appointment of auditors.
- It lets the Central Government, by rules, exempt classes of companies that meet prescribed conditions from appointing an auditor.
- The Bill itself sets no turnover or size limit. That is left to rules made later.
- Earlier reports in late 2025 said the MCA was considering exempting companies with turnover up to ₹1 crore. That figure came from news reports and is not in the Bill as we understand it.
- Timeline (PRS): introduced in the Lok Sabha on 23 March 2026 and referred to a Joint Parliamentary Committee the same day. The committee reported on 3 August 2026.
- The committee's recommendation: limit the exemption to private companies, to support ease of doing business while keeping accountability. Whether the Government accepts this, and the final text, were not settled when we checked.
- Critics point out that handing the thresholds to rules is a large delegation of power, and that a company could end up with no audit under either the Companies Act or the Income-tax Act.
Reports that small private companies have already been exempted are wrong. As far as we can tell, nothing is in force.
What nobody knows yet
| Question | Status |
|---|---|
| Which size or turnover limit? | Not set. Left to rules |
| Private companies only, or others? | The committee recommended private companies only. Not final |
| Conditions such as no public borrowing or no listed parent? | Not set |
| When would it start? | Not set |
| Would banks, investors and tax rules still ask for an audit? | Separate from the Companies Act. Likely yes in many cases |
If a client or reader tells you the exemption is already law, ask for the notification number.
The model it is compared to
Singapore is the usual comparison. There, a private company is exempt from audit if it qualifies as a "small company": it must meet at least two of three tests in each of the last two years, namely revenue of S$10 million or less, total assets of S$10 million or less, and 50 or fewer employees. The company still prepares financial statements and its directors remain responsible for them. We did not verify the rules for Malaysia, so we do not describe them here.
The lesson from Singapore is that exemption removes the audit, not the accounts. Someone still has to prepare statements that are right.
What does not change
Even if a class of companies is exempted from appointing an auditor, a company still needs to:
- Keep proper books of account.
- Prepare a balance sheet and profit and loss account in the Schedule III format.
- Have the directors approve and sign them. The people who sign are accountable for them.
- File them with the Registrar of Companies. See AOC-4 due date and filing.
- Meet the rules of other laws. A tax audit under section 44AB depends on the Income-tax Act, not on Section 139. Lenders and investors often ask for audited accounts whatever the Companies Act says.
An exemption from the audit is not an exemption from being right.
How to prepare your own balance sheet
Whether or not the Bill passes, a company that can prepare reliable statements in-house is better placed. A practical order:
- Close the books properly. Cut-off, accruals, prepayments, provisions. Most errors in self-prepared accounts are timing errors.
- Reconcile every bank account to the statement at year-end, and clear old reconciling items.
- Reconcile debtors and creditors to ledgers and, for key parties, to their confirmations. For MSME creditors, check the 45-day payment position.
- Tie the books to the returns. GST (books against GSTR-2B and returns), TDS (books against Form 26AS and AIS) and PF, ESI and PT (challans against payroll). A gap here is a liability you have not recorded.
- Fixed assets and depreciation. Reconcile the register to the ledger and recompute depreciation with the Schedule II calculator.
- Map the trial balance to Schedule III. Group each ledger into the right line of the balance sheet. The Schedule III mapping validator flags lines that are mapped wrongly, and our guide on trial balance to Schedule III with linked Excel formulas shows the method.
- Prepare the cash flow statement and the notes. Our cash flow statement builder helps.
- Run the ratios and ask why anything moved. A ratio that jumped is often an error. See the Schedule III ratio calculator.
- Check the disclosures the Act and CARO would otherwise have covered. See the CARO 2020 checker to see which matters a statutory auditor would have reported on.
- Keep the evidence. A file for every balance: the reconciliation, the confirmation, the working. If a lender or the tax officer asks, the file answers.
Who might benefit, and who should be careful
Likely to benefit: very small private companies with simple books, no outside investors and no bank covenant requiring an audit.
Should be careful: companies with bank loans, outside investors, group reporting duties or a tax audit limit crossed. For them, audited accounts will probably stay in use, whatever Section 139 says.
Frequently Asked Questions
Is the audit exemption for small companies in force?
No. It is a proposal in Clause 44 of the Corporate Laws (Amendment) Bill, 2026. As far as we can tell the Bill is still pending after the Joint Parliamentary Committee reported on 3 August 2026.
Would it cover all companies?
The Joint Parliamentary Committee recommended limiting it to private companies. The final text had not been settled when we checked.
What turnover limit applies?
None has been set. Early reports mentioned ₹1 crore of turnover, but the Bill leaves the limit to rules.
Would a company without an auditor still file financial statements?
Based on the Bill's wording, the exemption concerns the appointment of an auditor. Preparing, approving and filing financial statements would still be needed. Check the rules once made.
Would a tax audit still be needed?
Section 44AB is under the Income-tax Act and does not depend on Section 139. Critics have noted the risk of a company falling outside both. Check your own tax audit limits.
How is this like Singapore?
Singapore exempts a private company from audit if it meets two of three size tests. The company still prepares financial statements, and its directors remain responsible.
Related Articles
- AOC-4 due date: filing financial statements with the ROC
- Trial balance to Schedule III with linked Excel formulas
- Schedule III balance sheet format and divisions
- Self-prepared financial statements: a readiness page for companies
- Singapore audit exemption: the small company test and ACRA's 2026 review
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