Statement of Financial Transaction – SFT consists of certain specified financial high-value transactions undertaken by citizens that the Government proposes to track, with an intent to curb black money and widen the tax base in India.
The Government of India requires certain specified persons and entities to report high-value transactions undertaken by citizens to the Income Tax department.
Such specified persons were required to submit ‘Annual Information Return (AIR)’ introduced in 2003 with respect to specified financial transactions under Section 285BA.
- What is SFT?
- Specified transactions required to be reported in SFT or Statement of Financial Transaction
- Specified persons required to report such transactions
- When the transactions are required to be reported?
- Aggregation rule
- Forms to be used for furnishing SFT
- What is the Procedure to Submit SFT?
- Due date of furnishing SFT
- Inaccurate or defective statement of financial transaction
- Consequences of failure to comply with Section 285BA and related Rules
- FAQs
What is SFT?
SFT is a report of specified financial transactions specified persons need to submit to the to the income tax authority or such other specified authority or agency.
Also, as per section 285ba of Income Tax Act, specified persons who need to register, maintain or record such specified financial transaction are under an obligation to submit SFT.
Specified transactions required to be reported in SFT or Statement of Financial Transaction
Financial transaction under Section 285BA are as follows:
- Transaction of purchase, sale or exchange of goods or property or right or interest in a property; or
- The tansaction for rendering any service; or
- Transaction under a works contract; or
- Any transaction by way of an investment made or an expenditure incurred; or
- Transaction for taking or accepting any loan or deposit
Specified persons required to report such transactions
Following persons shall be required to furnish statement of financial transactions or reportable accounts registered or recorded or maintained by them during a financial year to the prescribed authority:
- An assessee;
- The prescribed person in the case of an office of Government;
- A local authority or other public body or association;
- The Registrar or Sub-Registrar appointed under the Registration Act, 1908;
- The registering authority empowered to register motor vehicles under Chapter IV of the Motor Vehicles Act, 1988;
- The Post Master General as referred to in section 2 of the Indian Post Office Act, 1898;
- The Collector referred to in section 3 of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013;
- The recognised stock exchange referred to in section 2 of the Securities Contracts (Regulation) Act, 1956;
- An officer of the Reserve Bank of India, constituted under section 3 of the Reserve Bank of India Act, 1934;
- A depository referred to in section 2 of the Depositories Act, 1996 (22 of 1996); or
- A prescribed reporting financial institutions
- A person, other than those referred to in clause (a) to (k), as may be prescribed.
When the transactions are required to be reported?
Section 285BA authorizes CBDT to prescribe values for specified financial transactions.
Moreover, based on such specified value of different nature of transactions, specified persons need to report the same in SFT.
The nature and value of transactions prescribed by CBDT via Rule 114E is given below:
| Sr No | Nature of transaction to be reported | Monetary Threshold limit | Specified person required to submit SFT |
| 1 |
Cash payment for purchase of bank drafts or pay orders or banker’s cheque Payments in cash for purchase of pre-paid instruments issued by Reserve Bank of India Cash deposits or Cash withdrawals from one or more current account of a person |
Aggregating to INR 10 lakh or more in a FY Amount aggregating to INR 10 lakh or more during the FY
Aggregating to INR 50 lakh or more in a FY |
A banking company or Co-operative bank to which Banking Regulation applies |
|
2 |
Deposits in one or more accounts other than a current account and time deposit of a person | Aggregating to INR 10 lakh or more in a FY | A banking company or Co-operative bank to which Banking Regulation applies Post-Master General of post office |
| 3 | One or more time deposits (other than renewed time deposit of another time deposit) of a person | Aggregating to INR 10 lakh or more in a FY |
(i) A banking company or a co‑ (ii) Post Master General (iii) Nidhi Company (iv) Non-banking financial company |
| 4 | Credit card payments made by any person either in cash or by any other mode in a FY. | Aggregating to INR 1 lakh or more in cash or INR 10 lakh or more by any other mode in a FY | A banking company or Co-operative bank to which Banking Regulation applies or any other company or institution issuing credit card |
| 5 | Receipt from any person for acquiring bonds or debentures issued by the company or institution (other than renewal) | Aggregating to INR 10 lakh or more in a FY | A company or institution issuing bonds or debentures |
| 6 | Receipt from any person for acquiring shares (including share application money) issued by the company | Aggregating to INR 10 lakh or more in a FY | Any company issuing shares |
| 7 | Buyback of shares from any person (other than the shares bought in the open market) | Aggregating to INR 10 lakh or more in a FY | Listed company purchasing its own securities under section 68 of the Companies Act, 2013 |
| 8 | Receipt from any person for acquiring units of one or more schemes of a Mutual Fund (other than transfer from one scheme to another) | Aggregating to INR 10 lakh or more in a FY | A trustee of a Mutual Fund or any such other person authorized to manage the affairs of the Mutual Fund |
| 9 | Receipt from any person for sale of foreign currency including any credit of such currency to foreign exchange card or expense in such currency through a debit or credit card or through issue of travelers cheque or draft or any other instrument | Aggregating to INR 10 lakh or more during a FY | Authorized person as referred in the Foreign Exchange Management Act, 1999 |
| 10 | Purchase or sale of immovable property | Transaction value or valuation of stamp duty authority referred in Section 50C for an amount of INR 30 lakhs or more. | Inspector-General appointed under section 3 of the Registration Act, 1908 or Registrar or Sub-Registrar appointed under section 6 of that Act. |
| 11 | Cash receipt for sale, by any person, of goods or services of any nature (other than those specified at Sl. Nos. 1 to 10) | Exceeding INR 2 lakh | Any person who is liable for audit under section 44AB of the Act |
| 12 | Cash deposits during the period 09th November, 2016 to 30th December, 2016 | Aggregating to INR 12,50,000 or more in one or more current account of a person or INR 2,50,000 or more in one or more account (other than current account) of a person | A banking company or Co-operative bank to which Banking Regulation applies Post Master General of post office |
| 13 | Cash deposits during the period 1st of April, 2016 to 9th November, 2016 in respect of accounts that are reportable under Sl.No.12. | A banking company or Co-operative bank to which Banking Regulation applies Post Master General of post office |
Aggregation rule
As it can be seen from the above monetary threshold for specified financial transaction except SI No 10 and 11, aggregation is required to analyze if monetary threshold is being crossed. While aggregating the amount, the following shall be noted:
- All accounts of the same nature in respect of that person during the Financial Year shall be taken into account
- For eg: If Mr. Z has two current accounts and deposited amount of INR 10 lakh each, in order to check monetary threshold of INR 20 lakh, amount in both savings account need to be aggregated
- All transactions of the same nature in respect of that person during the FY shall be aggregated
- For eg: If Mr. Y has purchased shares for a value of INR 15 lakhs in October in a FY also INR 7 lakhs in November of the same FY, value of both shares need to be aggregated to check monetary threshold of INR 22 lakhs
- In a case where the account is maintained or transaction is recorded in the name of more than one person like joint account, attribute the entire value of the transaction or the aggregated value of all the transactions to all the persons
- For eg: In case Mr. Y and Mr. Z holds two joint savings account of INR 8 lakhs and INR 12 lakhs, aggregation of INR 20 lakhs is attributed to both Mr. A and Mr. B separately to check for monetary threshold
Forms to be used for furnishing SFT
The statement of financial transaction shall be furnished electronically (under digital signature) in Form 61A to the Director of Income-tax (Intelligence and Criminal Investigation) or the Joint Director of Income-tax (Intelligence and Criminal Investigation).
However, Post Master General or a Registrar or an Inspector General may furnish Form 61A in a computer readable media being a Compact Disc or Digital Video Disc (DVD), along with the verification in Form-V on paper.
What is the Procedure to Submit SFT?
SFT shall be submitted through following procedure:
- Generate New ITDREIN
Log in on e-filing portal and go to My Account> Manage ITDREIN (Income Tax Department Reporting Entity Identification Number)
Select form type and Reporting entity category and click on ‘Generate ITDREIN’
Based on this selection, appropriate ITDREIN will be generated and confirmation email and SMS will be sent to registered email id and mobile number respectively
ITDREIN generated will now appear under My Account>Manage ITDREIN - Prepare Form
Go to e-file>Upload Form ‘xxx’ (appropriate Form No appears based on the selection made during registration)
Verify/enter PAN, Form Name, FY, Reporting entity category, Half year, upload type i.e., whether original/correction form /Nil statement - Upload the file
On successful validation of above details, upload the file along with digital signature certificate
Success message will be displayed on the screen on successful uploading and confirmation email and SMS will be sent to registered email id and mobile number respectively
Uploaded file may be either ‘accepted’ or ‘rejected’. In case of rejection, reason for rejection would be mentioned and correction form shall be submitted through above procedure
Due date of furnishing SFT
The statement shall be furnished on or before 31st May immediately following the financial year in which the transaction is registered or recorded.
Inaccurate or defective statement of financial transaction
If any person, after filing the statement, comes to know or discovers any inaccuracy in the information provided in the statement, he shall inform such inaccuracy to the prescribed income-tax authority within a period of ten days and furnish the correct information.
On the other hand, the prescribed income-tax authority may also intimate the defect to the person and give him an opportunity of rectifying the defect within a period of thirty days from the date of such intimation or within such extended period as may be allowed by prescribed income-tax authority.
Consequences of failure to comply with Section 285BA and related Rules
Non-furnishing of statement of financial transaction or reportable account will attract penalty under section 271FA. Penalty can be levied of Rs. 500 per day of default
In case of non-furnishing of SFT within due date, the prescribed income-tax authority may serve notice upon such person requiring him to furnish SFT within a period not exceeding 30 days from the date of service of such notice and he shall furnish the statement within the time specified in the notice.
If person fails to file the statement within the specified time, then a penalty of INR 1,000 per day will be levied from the day immediately following the day on which the time specified in such notice for furnishing the statement expires.
FAQs
If any person, after filing the statement, comes to know or discovers any inaccuracy in the information provided in the statement, he shall inform such inaccuracy to the prescribed income-tax authority within a period of ten days and furnish the correct information.
If defect is not rectified within such period, such statement shall be treated as invalid and consequences of non-furnishing of SFT shall apply
Nil Statement is not mandatory but to stay on the safer side an assessee should consider filing the SFT (Statement of Financial Transactions).
Hey @TeamQuicko
Thanks for the blog! Just one quick question - Why do we have to report a quarterly breakdown of Dividend Income under IFOS?
Thank you!
Hey @TanyaChopra
This quarterly breakdown of Dividend Income under IFOS will help to calculate and determine penalty u/s 234C for the delay in payment of Advance Tax.
Hope this helps!
I had received dividend recently but I had noticed that TDS had been deducted. any idea as to why has it happened and is there a way I can claim this TDS?
Hey @HarshitShah
After the introduction of Budget 2020, dividend income is now taxable in the hands of the shareholder; and is also subject to TDS at 10% in excess of INR 5000 u/s 194 & 194K. Foreign Dividend is taxable at slab rates. TDS is not applicable to such dividends. The taxpayer should report such income under the head IFOS in the ITR filed on the Income Tax Website.
Hope this helps!
Hey @HarishMehta
Yes, dividend income is now taxable from FY 2021-22 onwards and it has to be reported under the head of IFOS.
You can read more about it here:
Hi @Maulik_Padh,
You need to pay Income tax on the net taxable income, i.e. after subtracting deductions, expenses, etc.
If the net taxable income is negative i.e. if there is loss, you can carry it forward when filing the ITR
Here are some of the articles which might help
Hi @ameyj
The amount of TDS deducted shall reflect in your Form 26AS only and it will also reflect the name of the deductor.
Using the name of the deductor you can find out on which share you have received the dividend and you can also cross-check the same in your bank statement.
Yes, you are right, TDS is to be deducted when the dividend paid exceeds 5000 INR in a financial year. However, the 5,000 INR limit pertains to all the dividends an individual gets in a year, or the total dividend per shareholder that a company pays out in a year, is left to interpretation, and hence registrars and share transfer agents (RTA) are not taking any chances and are deducting TDS even on small amounts.
Hope this helps
Hi @ameyj
You can submit a grievance on Income Tax Portal mentioning the issue and also attach the 26AS.
The other option is to leave it as it is and clarify it when the tax department sends the notice.
Hi @TeamQuicko
Consider that I have 10 shares each of 10 different Indian companies. Each of the 10 companies are declaring a dividend of INR 100 before the FY ends. Now I will be recieving 1000 as dividend from each company, thereby a total of 10,000.
The 5,000 dividend limit, is it applicable to each company / total dividend recieved by me in a year. If it is applicable to each company, then I would not attract TDS of 10% for dividend.
Also pl clarify, how would the company B know that I have got shares of Company A,C,D,E so on…
@Saad_C @Laxmi_Navlani @Divya_Singhvi @Kaushal_Soni @AkashJhaveri can you help with this?