No tax on cash sales of agricultural produce for less than 2 lakh rupees: IT department

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The Income Tax Department on Friday clarified that cash sales of the agricultural produce by its cultivator to the trader for less than ₹2 lakh can be exempted from tax under the Income Tax Act.

The revenue department today said farmers do not need to quote PAN for cash sale of their produce up to Rs 2 lakh a day.

Circular of the department

It is clarified that cash sale of the agricultural produce by its cultivator to the trader for an amount less than Rs 2 lakh will not.

a) Result in any disallowance of expenditure under section 40A (3) of the Act in the case of trader.

b) Attract prohibition under section 269ST of the Act in the case of the cultivator; and require the cultivator to quote his PAN/ or furnish Form No 60.”

Section 40A (3)

In order to disincentive cash transactions, it is proposed in the Finance Bill 2017, w.e.f. AY 2018-19(FY 2017-18)

To amend the provision of Section 40A of the Act to provide the following

i. To reduce the existing threshold of cash payment to a person from twenty thousand rupees to ten thousand rupees in a single day; i.e any payment in cash above ten thousand rupees to a person in a day, shall not be allowed as deduction in computation of income from “Profits and gains of business or profession”.

ii. Deeming a payment as profits and gains of business or profession if the expenditure is incurred in a particular year but the cash payment is made in any subsequent year of a sum exceeding ten thousand rupees to a person in a single day; and

iii. Further expand the specified mode of payment under respective sub-section of Section 40A from an account payee cheque drawn on a bank or account payee bank draft to by an account payee cheque drawn on a bank or account payee bank draft or use of electronic clearing system through a bank account.

There is no change proposed by the Finance Bill, 2017 in threshold limit of Rs. 20000/- in section 269SS & section 269T of the Act. However, after section 269SS of the Act, the following new section is proposed to be inserted in the Act, namely:-

‘269ST. No person shall receive an amount of three lakh rupees or more

a. In aggregate from a person in a day; or

b. In respect of a single transaction; or

c. In respect of transactions relating to one event or occasion from a person, otherwise than by an account payee cheque or an account payee bank draft or use of electronic clearing system through a bank account:

Provided that the provisions of this section shall not apply to

(i) any receipt by-

(a) Government;

(b) any banking company, post office savings bank or cooperative bank;

(ii) transactions of the nature referred to in Section 269SS;

(iii)Such other persons or class of persons or receipts, which the Central Government may, by notification in the Official Gazette, specify.

Explanation- For the purpose of this Section,-

(a) “banking company” shall have the same meaning as assigned to it in clause (i) of the Explanation to Section 269SS;

(b) “co-operative bank” shall have the same meaning as assigned to it in clause (ii) of the Explanation to Section 269SS.

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