Cash deposited by customer

If cash is deposited in our account by a customer, does this count as cash receipts or should we consider it to be non-cash?

For 44AD eligibility of 3 crore, we are just under the 5% cash limit. But if we add this deposit made by a customer to the cash tally, then we will cross the limit and that will be a whole mess.

Replies (2)
Quick Summary
This discussion clarifies whether cash deposited directly into your business account by a customer is considered a cash receipt for Section 44AD eligibility. The consensus is that it absolutely counts as a cash receipt. If including such deposits pushes your total cash receipts over the 5% limit, you will lose eligibility for the enhanced ₹3 crore turnover threshold under Section 44AD, reverting to the standard ₹2 crore limit.

Yes, cash deposited directly into your bank account by a customer counts as a cash receipt. It must be added to your cash tally, and if including this amount pushes your total cash receipts over the 5% threshold, you will lose your eligibility for the enhanced ₹3 crore limit under Section 44AD.

 

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:

  1. Cash receipts do not exceed 5% of total receipts
  2. 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

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