Turnover below 10 crores Cash Receipts or Payments below 5% of the total transactions

Hi please proceed in the following manner - 

a2i. If No , Whether during the year Total sales/turnover/gross receipts of business is between Rs. 1 crores and Rs. 10 crores? - Select Yes

a2ii. If Yes is selected at a2i, whether aggregate of all amounts received including amount received for sales, turnover or gross receipts or on capital account like capital contributions, loans etc. during the previous year, in cash & non-a/c payee cheque/DD, does not exceed five per cent of said amount - Select yes

a2iii. If yes is selected at a2i, whether aggregate of all payments made including amount incurred for expenditure or on capital account such as asset acquisition, repayment of loan etc. in cash & non-a/c payee cheque/DD, during the previous year does not exceed five per cent of the said payment ? - Select yes

b. Are you liable for audit under section 44AB? * - Select No

In the said case, tax audit is not required.

Both tests must pass for the Rs 10 crore exemption to apply. Failing either one means your effective audit threshold falls back to Rs 1 crore.

Test 1 (receipts): Total cash receipts during the year must be 5% or less of total receipts. Cash here means any receipt not by account payee cheque, account payee bank draft, RTGS, NEFT, or other specified digital modes. Net banking, UPI, credit/debit card all count as non-cash.

Test 2 (payments): Total cash payments must be 5% or less of total payments for the year.

Two computation errors come up frequently:

1. Computing on turnover instead of aggregate receipts. The 5% ceiling applies to ALL cash inflows during the year, not just sales receipts. Advances received from customers, loans taken in cash, and even GST amounts received in cash count toward the total. Some clients computed only on net sales and got a misleadingly low cash percentage.

2. Annualizing for part-year operations. If the business started mid-year or closed early, the 5% test still applies to actual receipts and payments for the operating period, not extrapolated to a full year.

For a partnership firm or company with multiple bank accounts, cash receipts and payments across ALL accounts are aggregated for this purpose.

If you are on the borderline, it is worth computing both percentages conservatively before deciding whether to audit. The discomfort of a voluntary audit is far less than a penalty under Section 271B (0.5% of turnover, minimum Rs 1.5 lakh) for a missed mandatory audit.

For guidance on how this threshold applies under the new Income Tax Act 2025 (where Section 63 replaces 44AB from TY 2026-27), the [CA services page at Tax Garden](https://taxgarden.in/pricing) has a breakdown of current and upcoming audit requirements.