Classification of audio samples is an important part of many auditory systems. Deep learning models based on the Convolutional and the Recurrent layers are state-of-the-art in many such tasks. In this paper, we approach audio classification tasks using capsule networks trained by recently proposed dynamic routing-by-agreement mechanism. We propose an architecture for capsule networks fit for audio classification tasks and study the impact of various parameters on classification accuracy. Further, we suggest modifications for regularization and multi-label classification. We also develop insights into the data using capsule outputs and show the utility of the learned network for transfer learning. We perform experiments on 7 datasets of different domains and sizes and show significant improvements in performance compared to strong baseline models. To the best of our knowledge, this is the first detailed study about the application of capsule networks in the audio domain.