Chartered Accountant · ICAI M.No. 153926 · FRN 136869W
Business: 1 crore / 10 crore
₹1 crore normally; ₹10 crore if both cash receipts and cash payments are 5% or less of the total. Confirm current limits.
The 5% cash condition
See how the 5% cash test works — it’s what lets digital businesses use the higher limit.
A worked example
Suppose a trader has turnover of ₹3 crore in the year, with all sales collected by NEFT and UPI and all purchases paid by bank transfer — cash is under 5% of both receipts and payments. Because of the 5% test, the audit limit for this business is ₹10 crore, so no tax audit is required despite the ₹3 crore turnover. Change one fact — say ₹20 lakh of sales came in cash, taking cash receipts past 5% — and the ₹1 crore limit applies again, making the audit mandatory. The lesson is that pushing collections and payments through the banking channel is what keeps a mid-sized business out of audit. Note that turnover, not profit, is tested, and that for a profession the separate ₹50 lakh receipts limit applies regardless of the cash position. If you’re close to a threshold, it pays to project the full-year figure a couple of months early.