CS Professional · Advanced Direct Tax Laws and Practice · Tax Audit
Sharma Traders, a proprietary concern, has business turnover of Rs 4 crore in the tax year. Its cash receipts are Rs 12 lakh and its cash payments are Rs 9 lakh, against total receipts of Rs 4 crore and total payments of Rs 3.6 crore. Under section 63 of the Income-tax Act, 2025, is a tax audit required?
No tax audit is required. Cash receipts are 3% and cash payments 2.5%, both within 5%, so the turnover threshold rises to ten crore rupees under section 63, and turnover of four crore does not exceed it.
- AYes, because turnover exceeds one crore rupees and the cash limits are not met
- BNo, because cash receipts and payments are within 5% each, so the limit becomes ten crore rupeesCorrect
- CNo, because proprietors are exempt from tax audit
- DYes, because cash payments exceed 2% of total payments
Explanation
Cash receipts 12 lakh / 400 lakh = 3%, within 5%. Cash payments 9 lakh / 360 lakh = 2.5%, within 5%. Both conditions are met, so the limit is ten crore rupees; turnover of Rs 4 crore does not exceed it. Option A ignores the enhanced limit.
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