Proof of purchase of agricultural produce
This query is : Resolved
09 October 2016
is dealer require to obtain proof regarding purchase of agricultural produce from farmers like RTC or anything since there is provision of exemption of cash purchase of more than 20000 u/s 6DE
09 October 2016
of course he has to maintain proof of purchase, the exemption is for mode of payment through demand draft or through cheque.
09 October 2016
no pls clarify if dealer makes payment in cash is cash payment of m
09 October 2016
dealer maintains urd purchase bill but for payment of more than 20000 whether he has to obtain any document to prove that he is famer
10 August 2024
Under Section 6DE of the Income Tax Act, the provisions concerning the exemption from tax on cash purchases from farmers can be quite specific. Here’s a detailed explanation regarding the proof of purchase and compliance requirements:
### **1. Proof of Purchase**
#### **1.1 Requirement for Dealers**
- **Documentary Evidence**: Dealers are required to maintain documentary evidence to support the purchase of agricultural produce from farmers. This typically includes obtaining proof of the transaction such as receipts or bills from the farmers.
- **Proof of Farmer Status**: If a dealer is making a cash payment of more than ₹20,000, they need to ensure that the agricultural produce is indeed being purchased from a genuine farmer. The documentation should include evidence that the supplier is a farmer.
#### **1.2 Common Proofs**
- **Receipt or Bill**: A receipt or bill issued by the farmer for the sale of produce.
- **Record of Payment**: Payment records including cash transactions and any corresponding bank statements or ledgers.
- **Farmer Declaration**: A declaration or affidavit from the supplier stating that they are a farmer, if not provided otherwise.
### **2. Section 6DE of the Income Tax Act**
#### **2.1 Exemption Details**
- **Cash Payment Limit**: Section 6DE provides an exemption for purchases made in cash exceeding ₹20,000 from a single farmer or seller in a financial year.
- **Exemption Criteria**: To qualify for the exemption, dealers must ensure that the cash transactions are genuine purchases from farmers. The exemption is aimed at facilitating ease of doing business with small farmers and not creating undue burdens.
### **3. Compliance and Documentation**
#### **3.1 Maintaining Records**
- **Maintain Purchase Records**: Dealers must maintain proper records of all purchases and payments, including details of the farmer's identity and the produce purchased.
- **Documentation for Large Transactions**: For cash payments exceeding ₹20,000, while the exemption applies, having solid documentation to prove that the payment was made to a genuine farmer is crucial for compliance.
#### **3.2 Practical Steps**
- **Farmer Identification**: Dealers can request identification from the farmer, such as an Aadhaar card or other official ID, to confirm their identity and status as a farmer.
- **Farm Registration**: In some cases, dealers might need to verify if the farmer is registered or recognized by local agricultural bodies.
### **4. Audit and Compliance**
- **Periodic Checks**: During audits, the Income Tax Department may scrutinize the records to ensure compliance with Section 6DE. Dealers must be prepared to present all relevant documentation.
- **Consultation**: It is advisable for dealers to consult with a tax advisor or accountant to ensure all documentation is in order and that they comply with the provisions of Section 6DE.
### **Summary**
- **Documentation Required**: Dealers should obtain and maintain proof of purchase, including receipts, bills, and possibly an affidavit or declaration confirming the supplier is a farmer.
- **Cash Payments**: For cash payments exceeding ₹20,000, proper documentation is necessary to claim the exemption under Section 6DE.
Ensuring proper documentation helps in maintaining compliance and avoiding any issues during audits or tax assessments.
### **1. Proof of Purchase**
#### **1.1 Requirement for Dealers**
- **Documentary Evidence**: Dealers are required to maintain documentary evidence to support the purchase of agricultural produce from farmers. This typically includes obtaining proof of the transaction such as receipts or bills from the farmers.
- **Proof of Farmer Status**: If a dealer is making a cash payment of more than ₹20,000, they need to ensure that the agricultural produce is indeed being purchased from a genuine farmer. The documentation should include evidence that the supplier is a farmer.
#### **1.2 Common Proofs**
- **Receipt or Bill**: A receipt or bill issued by the farmer for the sale of produce.
- **Record of Payment**: Payment records including cash transactions and any corresponding bank statements or ledgers.
- **Farmer Declaration**: A declaration or affidavit from the supplier stating that they are a farmer, if not provided otherwise.
### **2. Section 6DE of the Income Tax Act**
#### **2.1 Exemption Details**
- **Cash Payment Limit**: Section 6DE provides an exemption for purchases made in cash exceeding ₹20,000 from a single farmer or seller in a financial year.
- **Exemption Criteria**: To qualify for the exemption, dealers must ensure that the cash transactions are genuine purchases from farmers. The exemption is aimed at facilitating ease of doing business with small farmers and not creating undue burdens.
### **3. Compliance and Documentation**
#### **3.1 Maintaining Records**
- **Maintain Purchase Records**: Dealers must maintain proper records of all purchases and payments, including details of the farmer's identity and the produce purchased.
- **Documentation for Large Transactions**: For cash payments exceeding ₹20,000, while the exemption applies, having solid documentation to prove that the payment was made to a genuine farmer is crucial for compliance.
#### **3.2 Practical Steps**
- **Farmer Identification**: Dealers can request identification from the farmer, such as an Aadhaar card or other official ID, to confirm their identity and status as a farmer.
- **Farm Registration**: In some cases, dealers might need to verify if the farmer is registered or recognized by local agricultural bodies.
### **4. Audit and Compliance**
- **Periodic Checks**: During audits, the Income Tax Department may scrutinize the records to ensure compliance with Section 6DE. Dealers must be prepared to present all relevant documentation.
- **Consultation**: It is advisable for dealers to consult with a tax advisor or accountant to ensure all documentation is in order and that they comply with the provisions of Section 6DE.
### **Summary**
- **Documentation Required**: Dealers should obtain and maintain proof of purchase, including receipts, bills, and possibly an affidavit or declaration confirming the supplier is a farmer.
- **Cash Payments**: For cash payments exceeding ₹20,000, proper documentation is necessary to claim the exemption under Section 6DE.
Ensuring proper documentation helps in maintaining compliance and avoiding any issues during audits or tax assessments.
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