Cash Payment to Farmers

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This discussion explores the income tax implications of dealers making lump-sum cash payments to farmers for agricultural produce. Experts clarify that while cash payments are generally permissible, there are specific limits and conditions under income tax provisions. The proviso regarding agricultural income suggests that payments should not exceed Rs. 20,000 if both parties have agricultural income and no other taxable income.

Dipen

Dipen (Querist)
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03 February 2021 Dear Experts,

If a dealer purchases agriculture produce from farmers and sells in parts to end customers, in this case if he pays lumpsum payment to farmers, then will this cash payment be allowed under income tax provisions?

If yes , is there any limit?

Also will any declaration be required from farmers that he is a farmer and eligible to receive cash if allowed to farmers?

Please advice

Regards,

Rahul varshney

Rahul varshney (Expert)
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03 February 2021 How much cash payment is required to be done in a day. ?

Dipen

Dipen (Querist)
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04 February 2021 It is not fixed. Totally depends on business requirement.

Is there any limit for the same?

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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01 December 2021 Read the proviso in act .....
"Provided further that the provisions of this section shall not apply to any loan or deposit or specified sum, where the person from whom the loan or deposit or specified sum is taken or accepted and the person by whom the loan or deposit or specified sum is taken or accepted, are both having agricultural income and neither of them has any income chargeable to tax under this Act."
Thus limit should not exceed Rs. 20,000/-

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