Many Indian firms mistake audit notices for tax trouble, when the real trigger is a misread statutory audit threshold. A statutory audit, mandated by the Income‑Tax Act, checks books for compliance. Applicability hinges on entity type, turnover or gross receipts, and the proportion of cash transactions, not on profitability.

Proprietorships, partnerships and firms must audit once turnover exceeds ₹1 crore; the ceiling rises to ₹10 crore if cash receipts and payments each stay below 5 % of totals. Professionals face a ₹50 lakh gross‑receipt bar. LLPs trigger audit at ₹40 lakh turnover or ₹25 lakh capital contribution. All private, public and OPC companies require an audit regardless of revenue.

Audit reports must land by 30 September, with tax‑audit filings due 30 October, subject to extensions. Non‑compliance invokes Section 271B, levying 0.5 % of turnover up to ₹1,50,000, often outpacing the audit fee itself. Founders and finance teams that verify entity structure and cash ratios early dodge penalties and costly scrutiny.