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CA Final · Direct Tax Laws & International Taxation · Tax Audit and Ethical Compliances

Meera Traders, a proprietorship, has business turnover of Rs. 1.8 crore in the tax year. All its receipts and payments are made through banking channels, and cash receipts and cash payments are each well below 5% of the respective totals. Meera has no other audit requirement under any law, and her income is not computed under the presumptive provisions. Under section 63 of the Income-tax Act, 2025, is she required to get her accounts audited?

Meera is not required to get her accounts audited. Because both her cash receipts and cash payments are within 5% of the totals, the turnover threshold rises from Rs. 1 crore to Rs. 10 crore, and her turnover of Rs. 1.8 crore is below that enhanced limit.

  1. AYes, because turnover exceeds Rs. 1 crore
  2. BNo, because the limit is Rs. 10 crore where cash receipts and cash payments are each within 5%Correct
  3. CYes, because the limit is Rs. 50 lakh for a proprietor
  4. DNo, because a proprietor is never subject to tax audit

Explanation

Section 63 raises the turnover limit from Rs. 1 crore to Rs. 10 crore when cash receipts and cash payments each do not exceed 5%. Turnover of Rs. 1.8 crore is below Rs. 10 crore, so no audit is needed. The option stating the Rs. 1 crore limit ignores this enhanced threshold.

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