Agricultural purchase in cash from farmers

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mohak

Student

32 Points Posted on 11 April 2017

Hi,

We are in the business of agricultural commodities. We usually purchase the material from farmers in the village and then sell it. Earlier we used to purchase the material in cash from farmers as much as we want as there was no concept of cheque earlier. Now we are using cheques to purchase it. But some farmers dont have the bank ac with them so there is no other option left instead of paying them in cash. Is it legal now to purchase the material in cash from farmers, if yes then what is the limit and what proof do we have to produce during the audit about the price and quantity purchased from the farmers.

Replies (3)

sivaram

Asst Mgr-Taxation

5764 Points Posted on 11 April 2017

Agricultural commodities can be purchased from farmenrs in cash it seems just wait for others to respond

Sumeet

380 Points Posted on 11 April 2017

Payment to farmers can be made in cash, expenditure will not be disallowed under section 40A(3) because payment to farmers is still covered in exemptions given under rule 6DD. However in case you are making payment above 2,00,000 to any farmer, Provisions of new Section 269ST will be applicable and Penalty can be levied on farmer for accepting payment above 2,00,000 in cash since no exemption is given to farmers under Section 269ST.