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CMA Intermediate · Direct and Indirect Taxation · Profits and Gains of Business or Profession

Meena, a resident individual trader, has a turnover of Rs 2,80,00,000 in the tax year, of which cash receipts are Rs 20,00,000. She is an eligible assessee under section 58 of the Income-tax Act, 2025. Which statement is correct about her eligibility for the presumptive basis for the business covered by serial number 1?

She is not eligible. Turnover above Rs 2 crore qualifies only up to Rs 3 crore, and only if cash receipts do not exceed 5% of turnover. Five percent of Rs 2.8 crore is Rs 14 lakh, and her cash receipts of Rs 20 lakh exceed that.

  1. AShe is eligible because turnover does not exceed Rs 3 crore and cash receipts do not exceed 5% of turnoverCorrect
  2. BShe is not eligible because turnover exceeds Rs 2 crore
  3. CShe is eligible only if all receipts are in cash
  4. DShe is not eligible because cash receipts exceed 5% of turnover

Explanation

The higher limit of Rs 3 crore applies where cash receipts do not exceed 5% of turnover. 5% of 2.80 crore = Rs 14,00,000. Cash receipts of Rs 20,00,000 exceed this, so the Rs 3 crore limit is not available. Since turnover is above Rs 2 crore, she is ineligible.

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