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CA Intermediate · Taxation · Profits and Gains of Business or Profession

Ravi Textiles, a resident proprietor eligible for the presumptive scheme for businesses, has total turnover of ₹1,20,00,000 in tax year 2026-27. Of this, ₹90,00,000 was received through account payee cheques and electronic modes and ₹30,00,000 in cash. He declares income at the minimum presumptive rates. His business income is:

His income is ₹7,80,000. Turnover is within the limit, so the presumptive scheme applies. Digitally received turnover of ₹90 lakh at 6% gives ₹5,40,000 and cash turnover of ₹30 lakh at 8% gives ₹2,40,000, which total ₹7,80,000.

  1. A₹7,20,000
  2. B₹7,80,000Correct
  3. C₹9,00,000
  4. D₹9,60,000

Explanation

Cash receipts are 25% of turnover, so the turnover limit is ₹2 crore, and ₹1.2 crore is within it. Receipts by digital modes are taxed at 6%, giving 5,40,000. Cash receipts are taxed at 8%, giving 2,40,000. The total is ₹7,80,000. Applying 6% to all turnover gives ₹7,20,000, which ignores the cash portion.

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