Farm bodies exempted from 2% TDS on payments above Rs.1 Cr

To give relief to the rural economy, the government has exempted agriculture produce marketing committees (APMCs) from the purview of the 2% tax deducted at source (TDS) on payments above Rs.1 crore, an anti-abuse provision in the Income Tax Act introduced this year.

Finance minister Nirmala Sitharaman said in a tweet on Monday, “To avoid inconvenience to farmers and other stakeholders in the agriculture sector, agents operating under APMCs have been exempted from 2% TDS on cash payments above Rs.1 crore.

This TDS provision announced in the union budget had come into force from 1 September and had at that time exempted entities like the government, banks, cooperative societies and their banking correspondents.

The provision to levy 2% TDS in section 194 N also provided for exempting other entities through a notification. The decision to exempt farm bodies will be implemented using this clause. A notification to this effect is expected. A government official, who spoke on condition of anonymity, said that the decision was taken to give relief to the rural economy.

The 2% TDS was introduced to discourage cash transactions and to encourage the transition towards a less cash economy. The Central Board of Direct Taxes (CBDT) recently clarified that those who have withdrawn Rs.one crore or more in cash from banks or post offices upto 31 August will also be liable to a 2% TDS on further cash withdrawals from 1 September.

It then said that withdrawals made till August end would too count in computing the Rs.1 crore threshold for the levy. However, since the provision came into effect only from 1 September, cash withdrawal prior to that will not be subjected to TDS, although it will be counted in computing the threshold for the whole year. (ends) #casansaar (Source - PTI, LiveMint)