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CS Professional · Advanced Direct Tax Laws and Practice · Tax Audit

Ramesh Traders, a proprietary business, has sales of Rs 4 crore in the tax year. Cash receipts are Rs 15 lakh and cash payments are Rs 14 lakh; total payments are Rs 3.5 crore. Applying Section 63 of the Income-tax Act, 2025, is tax audit required?

Tax audit is not required. Cash receipts are 3.75% of Rs 4 crore and cash payments are 4% of Rs 3.5 crore, both within 5%, so the turnover limit rises to ten crore rupees. Turnover of Rs 4 crore does not exceed it.

  1. ANo, because cash receipts are 3.75% and cash payments 4% of the totals, so the ten crore limit appliesCorrect
  2. BNo, because turnover is below ten crore rupees in all cases
  3. CYes, because turnover exceeds one crore rupees and the ten crore limit applies only to companies
  4. DYes, because cash payments exceed Rs 10 lakh

Explanation

Cash receipts 15/400 = 3.75% (not above 5%). Cash payments 14/350 = 4% (not above 5%). Both conditions in clause (b) are met, so the limit becomes ten crore rupees. Turnover of Rs 4 crore is below it, so no audit under Section 63. The second option is wrong because the ten crore limit is available only if the cash conditions are met.

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