Explanation:

Statement 1 and 2: Agriculture in India is generally tax exempt, and dealt largely by state taxes since agriculture in India is a state subject. However, the Income Tax Department has clarified that the cash sales of agricultural produce by a cultivator to a trader for less than 2 lakh rupees will not attract tax under the Income Tax Act.

A circular issued by the Department said, the cultivator and the trader will also not have to provide their Permanent Account Number (PAN) or furnish Form 60. The clarification came following representations from stakeholders about applicability of income tax provision to cash sale of farm produce by farmers to traders.