Tax Consultant
1953 Points
Posted on 07 September 2026
Yes, cash deposited directly by a customer into your bank account is treated as a CASH RECEIPT for Section 44AD purposes.
The logic: the 5% cash receipt condition looks at the mode of receipt from the customer perspective. If the customer paid in cash (even if they deposited it directly into your account), it is a cash receipt. If the customer transferred funds via NEFT/RTGS/UPI/cheque and then you moved it, it is digital.
For the enhanced Rs 3 crore threshold under Section 44AD (Section 58 of IT Act 2025), both conditions must hold throughout the year:
- Cash receipts do not exceed 5% of total receipts
- Cash payments do not exceed 5% of total payments
If this customer deposit pushes your cash receipts past 5%, your turnover limit drops back to Rs 2 crore. You cannot selectively exclude certain deposits.
Practical check: get a bank statement breakdown of all receipts by mode. Any amount received where the originating party physically deposited cash counts as cash receipt.
Full breakdown of the 44AD rules and the 5-year lock-in risk: taxgarden.in/blog/section-44ad-presumptive-taxation-small-business-india