Chartered Accountant · ICAI M.No. 153926 · FRN 136869W
The 5% test
Both cash receipts and cash payments must each be within 5% of total receipts/payments to use the ₹10 crore limit.
What counts as cash
Banking-channel receipts/payments are not ‘cash’; physical cash is. Account-payee cheque/NEFT/UPI help you stay under 5%.
Tracking the 5% through the year
The test is applied on the full year’s figures, so it’s worth monitoring the cash share each quarter rather than discovering at year-end that you’ve crossed it. Count physical cash receipts and physical cash payments separately — both must independently stay within 5%. Bank transfers, cheques, UPI, cards and NEFT all sit outside ‘cash’. A common trap is cash expenses like wages, freight or petty purchases quietly pushing cash payments over the line even when sales are fully banked. If you’re near ₹1 crore of turnover, moving those payments to the banking channel is usually what preserves the higher ₹10 crore limit. Setting an internal rule that all vendor and wage payments go through the bank, and routing any unavoidable cash through an imprest with a monthly cap, keeps the ratio comfortably inside the limit and the working easy to demonstrate at audit.