Farmers selling their produce worth more than Rs 2 lakh in cash to a trader would have to quote their PAN or file Form 60, the Income Tax (I-T) Department said on Friday.

 The department issued the clarification stating that amounts lower than this would continue to be exempted from relevant provisions. The clarification assumes significance in the light of suggestions by a section of policy-makers to tax the agricultural income.

Earlier, Niti Aayog member Bibek Debroy had made case for doing away with the exemptions on personal income tax and bringing agriculture under the tax net in order to widen the tax base. The Modi government has, however, repeatedly maintained that it had no intention to bring agriculture under tax ambit. But throwing surprises is one of the key features of the present government.

The Central Board of Direct Taxes (CBDT) in a press statement today said that it had received representations from the stakeholders regarding applicability of provisions of Income-tax Act, 1961 to cash sale of agricultural produce by the cultivators and agriculturists.

In the clarification it said that cash sale of the agricultural produce by its cultivator to the trader for an amount less than Rs 2 lakh will not require the former to quote his PAN or furnish Form No 60. Also, it will not result in any disallowance of expenditure under section 40A (3) of the Act in the case of trader.

"The issue has been examined and vide circular No. 27/2017 dated 3rd November, 2017, CBDT has  clarified that cash sale of the agricultural produce by its cultivator to the trader for an amount less than Rs 2 lakh will not result in any disallowance of expenditure under section 40A (3) of the Act in the case of trader; 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," the press release said.

In the last Union Budget, the government had proposed to amend the Income Tax Act to ban cash dealings or Rs 3 lakh or more. But it later brought down the limit to Rs 2 lakh and amended the relevant provisions. The move was aimed at containing the flow of black money and promote digital modes of payments.

Accordingly, it amended Finance Act, 2017 by inserting new sections of 269ST and 271DA and made payments in excess of this amount a punishable offence.

"Any contravention to the said provision shall attract penalty of a sum equal to the amount of such receipt. However, the said restriction is not applicable to any receipt by government, banking company, post office savings bank or co-operative bank," the CBDT had said.