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CS Executive · Tax Laws and Practice · Procedural Compliance under Income Tax

Ravi Traders, a proprietary business, has a turnover of ₹3 crore in a tax year. Its cash receipts are 4% of total receipts and cash payments are 3% of total payments. Under the tax audit provisions of the Income-tax Act, 2025, is a tax audit required?

No tax audit is required. Cash receipts (4%) and cash payments (3%) are each within 5%, so the business threshold rises from one crore to ten crore rupees. Turnover of ₹3 crore is below ₹10 crore, so the audit provision is not triggered.

  1. AYes, because turnover exceeds ₹1 crore
  2. BNo, because the limit becomes ₹10 crore as both cash conditions are metCorrect
  3. CYes, because turnover exceeds ₹50 lakh
  4. DNo, because proprietors are exempt from audit

Explanation

Cash receipts of 4% and cash payments of 3% are both within the 5% ceiling, so the limit of ₹1 crore is replaced by ₹10 crore. Turnover of ₹3 crore does not exceed ₹10 crore, so no audit is needed. The ₹1 crore answer ignores the enhanced limit.

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