Karnataka RERA – Annual Audit of Accounts for the FY 2023-24 and Extension of Due date to 31st Dec 2024
Just as a conclusion can pave the way for a fresh start, the implementation of the RERA Act 2016 represents a significant transformation in how real estate transactions are conducted in India. It concludes the period of unregulated real estate development and begins a new chapter of accountability, fairness, trust, timelines and protection to all stakeholders. This new beginning benefits all stakeholders by fostering trust, transparency, and a more balanced playing field in the real estate market.
I have framed the Q&A section related to the Audit of Accounts of the promoter under the RERA Act, 2016, to provide readers with greater clarity and a better understanding –
Read: Audit of Accounts of Real Estate Project under RERA 2024: Karnataka RERA)
| Sl No | Question | Answers |
| 1 | What is the objective of conducting an audit of accounts of the promoter under the RERA Act 2016? | The primary objective of conducting an audit of accounts of the promoter under the RERA Act 2016 is to ensure transparency, accountability, and proper utilisation of funds by the promoter realised from the allottees in a real estate project. |
| 2 | Reference of legal provision under the Act, rules or Regulations | a. 3rd proviso to sec 4(2)(l)(D) RERA Act 2016
b. Regulation 3(1)(iii) of Karnataka RERA (General) Regulations, 2022 |
| 3 | Details of the provision with respect to the Annual Audit under RERA Act 2016 | ( read https://taxguru.in/corporate-law/audit-accounts-real-estate-project-rera-2024-karnataka-rera.html for
Audit of Accounts of Real Estate Project under RERA 2024: Karnataka RERA) |
| 4 | Due Date for submission of RERA Audit Report for the financial year ended 31st March 2024 | 30th September 2024 (With in six months from the end of the financial year (i.e., 30th Sep, 2024 for the year ending 31st March 2024)
Further K RERA has issued the circular for extension of time for submission of Annual Audit to 31st Dec 2024 vide No – RERA/Accounts/CR/129/2023-24 dated 30.11.2024 |
| 5 | Format of Audit Report notified by Karnataka RERA | Form 7 – Form-7 Annual Audit Report on Statement of Accounts |
| 6 | Any exemption for non-filing is applicable to any project? | Yes, in case of Affordable Housing in Partnership (AHP) under Pradhan Mantri Awas Yojana (Urban), the implementing agency is exempted from submitting an annual audit report on statement of accounts in Form 7.
Vide Notification No DOH 48 RERA 2023 dated 19th Aug 2024. Proviso to 3(1)(iii) of Karnataka RERA (General) Regulations, 2022 is inserted. |
| 7 | Who should certify and issue the audit report | Shall be certified and signed by the statutory auditor of the promoter’s enterprise (refer 3(1)(iii) of Karnataka RERA (General) Regulations, 2022) |
| 8 | Promoter maintains the books of accounts of the entity, further promoter is having multiple business and multiple projects. How to carry out the audit and issue the audit report? | The RERA Act, 2016 mandates that promoters must audit their accounts project-wise. The audit report must be verified and submitted to the Real Estate Regulatory Authority accordingly. Specifically, the promoter is required to ensure the following:
a) The audit must be conducted and reported on a project-by-project basis, and the report must be submitted to the Authority as per the regulations. b) Promoters must maintain separate records of the funds collected from allottees for each project. Additionally, expenses related to land acquisition and construction must be categorized project-wise. c) For promoters engaged in multiple businesses or projects, there must be a clear accounting system to bifurcate finances/expenses by project. This can be achieved through methods like Cost Centre or Profit Centre accounting. d) In practice, many promoters adopt Cost Centre or Profit Centre accounting systems to comply with these requirements, enabling them to efficiently segregate and report financials for each individual project. |
| 9 | Promoter has not received any funds from the allottees and invested own funds, is Audit required under RERA | Yes,
Audit is required for all RERA registered project irrespective of size, location, progress, sales, collections (unless specifically exempted by the RERA Authorities – refer clause 6 above) |
| 10 | Please clarify whether Audit is required for the project completed in between of the year? | Yes, if the project progresses or work is carried out during the financial year 2023-24 and is completed before 31.03.2024, an audit is still required.
For example, if the project development work is completed on 30.06.2023, the audit report for the financial year 2023-24 should be prepared for the project and must be submitted accordingly |
| 11 | Any Extension of due date is issued by Karnataka RERA for the submission of Audit Report? | Yes,
K RERA has issued the circular for extension of time for submission of Annual Audit to 31st Dec 2024 vide No – RERA/Accounts/CR/129/2023-24 dated 30.11.2024 https://rera.karnataka.gov.in/reraDocument?DOC=4963577 Actually, Karnataka RERA Authority sent a mail to all the promoters on 29th August 2024, as follows – Dear Promoter, As per section 4(2)(l)(D) of the RERA Act 2016 the promoters shall get his accounts audited within six months after the end of every financial year by a chartered accountant in practice and shall produce statements of accounts certified by the chartered accountant. The Authority has facilitated the Annual Audit Module to upload the Annual Audit Report (Form-7) for the financial year 2023-24. In case of failure to upload the Annual Audit Report within 30-09-2024, penalty under Section 60 shall be leviable. |
| 12 | Any penal consequences for non-adhering to the provisions of the Act? – Non filing or Delay in Filing | Failure to comply with the RERA audit requirements can lead to penalties under Section 60 of the RERA Act. The penalty can be up to 5% of the estimated cost of the project, and continued non-compliance can result in further actions such as cancellation of the project registration or legal proceedings.
Accordingly, the Karnataka RERA Authority levied penalties for delay/non-filing on 440 projects for the FY 2021-22. The total penalty amounted to over Rs. 40 crores Source – https://rera.karnataka.gov.in/viewAllProjectOrders |
Author, CA. Vinay Thyagaraj is a partner at M/s.Venu & Vinay, Chartered Accountants, you can reach him at [email protected] for clarification
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