Exemptions to many taxation and income laws have always included farmers, including section 40A(3), which disallows any cash transactions (i.e. not made by cheque/electronic/draft) above 10,000 for all business transactions. However, rule 6DD of 40A(3), exempted agriculturists. Recently an amendment, 269ST, was made during the February 2017 budget. The new rule, 269ST, disallows (with minor exceptions) for any cash transactions made by the farmer(cultivator) to the trader over Rs. 2 lakhs in a single day or multiple transactions related to the same event.
Under the new section, any cash transactions of agricultural produce by farmer/cultivator to trader under Rs. 2 lakhs, would not attract:
Therefore, it is advisable to collect payment of transactions over Rs. 2 lakhs by cheque/draft/electronic methods, so that prohibition can be avoided.