Introduction<\/p>\n
Limited Liability Partnerships (LLPs) have become a popular business structure in India because they combine the flexibility of a partnership with the benefit of limited liability. However, like any other business entity, an LLP has certain accounting and compliance responsibilities that need to be considered at the end of every financial year.<\/p>\n
One common question among LLP partners is whether the accounts of the LLP are required to be audited by a Chartered Accountant.<\/p>\n
For Financial Year 2025\u201326, statutory audit is not mandatory for every LLP. The applicability of audit is primarily determined by the LLP’s turnover and contribution limits prescribed under the Limited Liability Partnership Rules, 2009.<\/p>\n
Under the current framework, an LLP can claim exemption from audit where its turnover does not exceed \u20b940 lakh or its contribution does not exceed \u20b925 lakh, subject to the applicable conditions.<\/p>\n
LLP Statutory Audit Limit for FY 2025\u201326<\/p>\n
For FY 2025\u201326, the key limits to consider are:<\/p>\n
Particulars\tLimit
\n
Turnover\t\u20b940 lakh
\n
Partner’s Contribution\t\u20b925 lakh<\/p>\n
The important point is that these limits should be checked carefully while finalising the LLP’s accounts.<\/p>\n
If the LLP crosses the applicable exemption threshold, statutory audit becomes applicable under Rule 24 of the LLP Rules.<\/p>\n
Example 1 \u2013 Turnover exceeds the limit<\/p>\n
Suppose an LLP has:<\/p>\n
Turnover: \u20b945 lakh
\n
Contribution: \u20b920 lakh<\/p>\n
Although the contribution is below \u20b925 lakh, the LLP has crossed the \u20b940 lakh turnover threshold. Therefore, the LLP would need to consider statutory audit applicability.<\/p>\n
Example 2 \u2013 Contribution exceeds the limit<\/p>\n
Suppose another LLP has:<\/p>\n
Turnover: \u20b930 lakh
\n
Contribution: \u20b930 lakh<\/p>\n
Here, turnover is within \u20b940 lakh, but the contribution exceeds \u20b925 lakh. Accordingly, the audit exemption would not be available on the basis of these limits.<\/p>\n
Example 3 \u2013 Both are within the limits<\/p>\n
If an LLP has:<\/p>\n
Turnover: \u20b932 lakh
\n
Contribution: \u20b918 lakh<\/p>\n
and no other provision independently requires an audit, the LLP can generally remain exempt from statutory audit under Rule 24.<\/p>\n
What Does \u201cContribution\u201d Mean for an LLP?<\/p>\n
Contribution is another important figure that LLP partners should not overlook.<\/p>\n
A partner’s contribution may consist of money, property, other benefits or services, depending on the LLP agreement and applicable provisions. The monetary value of the contribution is required to be properly accounted for and disclosed in the LLP’s accounts.<\/p>\n
Therefore, while checking audit applicability, partners should not look only at the turnover shown in the books. The contribution position of the LLP should also be reviewed.<\/p>\n
This becomes particularly relevant for LLPs where partners have made substantial capital contributions even though the business turnover is comparatively low.<\/p>\n
Is Audit Exemption the Same as No Compliance?<\/p>\n
No.<\/p>\n
This is an important distinction.<\/p>\n
An LLP being exempt from statutory audit does not mean that it can stop maintaining books of accounts or ignore annual filing requirements.<\/p>\n
LLPs are still required to maintain appropriate accounting records and comply with the applicable provisions of the LLP Act and Rules. The LLP is also required to prepare and file its Statement of Account and Solvency and Annual Return within the prescribed framework.<\/p>\n
The Ministry of Corporate Affairs’ Form 8 itself requires the LLP to report its turnover position and is prescribed under Rule 24.<\/p>\n
Therefore, audit exemption should be viewed only as an exemption from the statutory audit requirement\u2014not as an exemption from LLP compliance as a whole.<\/p>\n
What Should an LLP Check Before Finalising FY 2025\u201326 Accounts?<\/p>\n
Before deciding whether an audit is applicable, the LLP should review its financial records carefully.<\/p>\n
The following points should be checked:<\/p>\n
Total turnover for FY 2025\u201326
\n
Contribution of all partners
\n
LLP agreement and changes in contribution
\n
Proper recording of income and expenses
\n
Bank and cash balances
\n
Loans and outstanding liabilities
\n
GST and other applicable tax records
\n
Books of accounts and supporting documents
\n
Statement of Account and Solvency
\n
Annual Return and other MCA filings<\/p>\n
A proper review at the year-end can help avoid mistakes in determining the LLP’s compliance requirements.<\/p>\n
Why Is Timely Review Important?<\/p>\n
Many LLPs look at the audit requirement only after the accounts have been finalised. This can create unnecessary problems if the turnover or contribution has already crossed the prescribed limit.<\/p>\n
For example, an LLP may initially estimate that its turnover will remain below \u20b940 lakh. However, after recording all sales and other relevant income for the year, the final turnover may cross the threshold.<\/p>\n
Similarly, a fresh contribution made by partners during the year can change the LLP’s position.<\/p>\n
That is why it is better to review the figures before finalising the books rather than checking the audit requirement at the last stage.<\/p>\n
Does an LLP Have to Get an Audit Even If It Is Below the Limit?<\/p>\n
Where an LLP qualifies for the audit exemption under Rule 24, statutory audit is generally not compulsory merely because it is an LLP.<\/p>\n
However, the partners may still choose to have the accounts audited voluntarily. An audit may also be useful where the LLP requires audited financial statements for business, banking, financing, investors or other commercial purposes.<\/p>\n
In addition, the LLP should separately consider whether any other law, regulation, agreement or specific requirement creates an audit or reporting obligation.<\/p>\n
Statutory Audit vs. Other Tax Requirements<\/p>\n
Another common misunderstanding is to treat LLP audit applicability and income-tax audit applicability as the same thing.<\/p>\n
They are not necessarily the same.<\/p>\n
The LLP audit requirement is governed by the LLP Act and the LLP Rules, whereas tax audit requirements arise under the Income-tax Act. Therefore, an LLP should not assume that exemption from LLP statutory audit automatically means that there can never be a tax audit requirement.<\/p>\n
The applicable tax provisions should be checked separately based on the LLP’s nature of business, turnover and other relevant circumstances.<\/p>\n
Conclusion<\/p>\n
For FY 2025\u201326, the statutory audit requirement for an LLP continues to revolve around the prescribed \u20b940 lakh turnover and \u20b925 lakh contribution limits under the LLP framework.<\/p>\n
In simple terms, an LLP should carefully check both figures before concluding that statutory audit is not applicable. Crossing the relevant threshold can make the LLP’s accounts subject to audit under Rule 24.<\/p>\n
At the same time, audit exemption should not be confused with exemption from maintaining books or completing annual LLP filings. Even a small LLP needs to keep its financial records properly updated and comply with the applicable MCA and tax requirements.<\/p>\n","protected":false},"excerpt":{"rendered":"
Know LLP statutory audit applicability for FY25-26, including the \u20b940 lakh turnover and \u20b925 lakh contribution limits, audit exemption & compliance requirements.<\/p>\n","protected":false},"author":12,"featured_media":0,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"_bbp_topic_count":0,"_bbp_reply_count":0,"_bbp_total_topic_count":0,"_bbp_total_reply_count":0,"_bbp_voice_count":0,"_bbp_anonymous_reply_count":0,"_bbp_topic_count_hidden":0,"_bbp_reply_count_hidden":0,"_bbp_forum_subforum_count":0,"_kad_post_transparent":"","_kad_post_title":"","_kad_post_layout":"","_kad_post_sidebar_id":"","_kad_post_content_style":"","_kad_post_vertical_padding":"","_kad_post_feature":"","_kad_post_feature_position":"","_kad_post_header":false,"_kad_post_footer":false,"_kad_post_classname":"","footnotes":""},"categories":[6],"tags":[],"class_list":["post-1299","post","type-post","status-publish","format-standard","hentry","category-compliances"],"_links":{"self":[{"href":"https:\/\/www.taxaj.com/learn\/wp-json\/wp\/v2\/posts\/1299","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.taxaj.com/learn\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.taxaj.com/learn\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.taxaj.com/learn\/wp-json\/wp\/v2\/users\/12"}],"replies":[{"embeddable":true,"href":"https:\/\/www.taxaj.com/learn\/wp-json\/wp\/v2\/comments?post=1299"}],"version-history":[{"count":0,"href":"https:\/\/www.taxaj.com/learn\/wp-json\/wp\/v2\/posts\/1299\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.taxaj.com/learn\/wp-json\/wp\/v2\/media?parent=1299"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.taxaj.com/learn\/wp-json\/wp\/v2\/categories?post=1299"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.taxaj.com/learn\/wp-json\/wp\/v2\/tags?post=1299"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}