Bhopal, Nov 6 (IANS): Traders can pay farmers up to Rs 2 lakh in cash against the purchase of their wheat produce notwithstanding income tax rules, the Central Board of Direct Taxes has said.

The move comes due to disaffection among farmers as they were not being paid even Rs 50,000 in cash for agricultural produce bought under the Minimum Support Price scheme despite instructions to this effect from the Madhya Pradesh government.

Chief Minister Shivraj Singh Chouhan had written to Union Finance Minister Arun Jaitley to redress the grievances of farmers regarding cash payments for their produce, following which the Finance Ministry issued the circular dated November 3 about the Rs 2-lakh cash limit.

The circular made it clear that purchases for Rs 2 lakh or less will not require production/furnishing of Permanent Account Number or Form Number 60.

An official statement issued here on Sunday said that as per the Income Tax Act of 1961, cash purchase above Rs 10,000 is not allowed but the limit has been waived for the purchase of agricultural produce.