With an aim to curb black money mess and to track high value cash transactions, the government has decided to implement new reporting guidelines vide Notification 1 of 2017 dated 17th January 2017. As per the govt’s notification, all goods & services providers have to report to the IT department about high value cash transactions & cash receipts. Under the new norms, cash receipts, purchase of shares, mutual funds, immovable property, term deposits, sale of foreign currency will have to be reported to the tax authorities in a prescribed format, which is Form 61A.

To keep a watch on high-value transactions by taxpayers, the I-T department has developed a statement of financial transactions called Annual Information Return (AIR). On its basis, tax authorities will collect information on suspected high value transactions during a year. Annual Information Return (AIR) of ‘high value financial transactions’ is required to be furnished under section 285BA of the Income-tax Act, 1961 by ‘specified persons’ in respect of ‘specified transactions’ registered or recorded by them during the financial year.

AIR that was introduced with effect from 1st April 2004, is now known as “SFTRA”- Specified Financial Transaction or Reportable Account. Erstwhile rule 114E of Income tax rules 1962 covered 7 type of transactions to be reported by specified class of persons such as banking company, trustee of Mutual fund, registrar/ sub-registrar,ec. Modified rule 114E, now covers 13 types of transactions (including earlier 7 types) to be reported by specified class of persons and most importantly covers Persons liable to audit u/s 44AB.

Transaction Types
SFT- 001: Purchase of bank drafts or pay orders in cash
SFT- 002: Purchase of pre-paid instruments in cash
SFT- 003: Cash deposit in current account
SFT- 004: Cash deposit in account other than current account
SFT- 005: Time deposit
SFT- 006: Payment for credit card
SFT- 007: Purchase of debentures
SFT- 008: Purchase of shares
SFT- 009: Buy back of shares
SFT- 010: Purchase of mutual fund units
SFT- 011: Purchase of foreign currency
SFT- 012: Purchase or sale of immovable property
SFT- 013: Cash payment for goods and services
SFT- 014: Cash deposits during specified period (1st April, 2016 to 8th November, 2016 and 9th Nov to 30th Dec, 2016)

Reporting person is required to furnish separate Form 61A for each transaction type. The transaction type under SFT have been categorised as under:

Section 285BA is substituted with effect from 1st April 2015 and it speaks about “obligation to furnish statement of financial transaction or reportable account”. As per section 285BA(1), Any person as defined under this section who is responsible for registering, or, maintaining books of account or other document containing a record of any specified financial transaction or any reportable account as may be prescribed under any law for the time being in force shall furnish a statement in respect of such specified financial transaction or such reportable account which is registered or recorded or maintained by him and information relating to which is relevant and required for the purposes of this Act, to the income-tax authority or such other authority or agency as may be prescribed.

Specified Financial Transaction means any-

  1. Transaction of purchase, sale or exchange of goods or property or right or interest in a property; or
  2. Transaction for rendering any service; or
  3. Transaction under a works contract; or
  4. Transaction by way of an investment made or an expenditure incurred; or
  5. Transaction for taking or accepting any loan or deposit,

NATURE AND VALUE OF TRANSACTIONS TO BE REPORTED UNDER RULE 114E:

Sl No Nature and value of Transactions Class of Person(Person reporting)
1 Payment of cash aggregating Rs.10,00,000 or more in a year for purchase of DD, Pay Orders, Bankers Cheque. • A Banking Company,

• Co- operative Bank

2 Payment made in cash aggregating to Rs.10,00,000 or more in a year for purchase of pre-paid instruments issued by RBI • A Banking Company,

• Co- operative Bank

3 A cash deposit aggregating to Rs.10,00,000 or more in a year in one or more bank accounts (other than current account or time deposit) • A Banking Company,

• Co- operative Bank,

• Post Master General of Post office

4 A Cash deposit aggregating to Rs.50,00,000 or more in a year in one or more current account of a person • A Banking Company,

• Co- operative Bank

5 A Cash withdrawal aggregating to Rs.50,00,000 or more in a year from one or more current account of a person • A Banking Company,

• Co- operative Bank

6 One or more time deposit (other than renewal) aggregating to Rs. 10,00,000 or more of a person • A Banking Company,

• Co- operative Bank,

• Post Master General of Post office,

• Nidhi referred to in Companies Act 2013

7 Credit card payment made by any person aggregating to Rs. 1,00,000 or more in a year in cash or Rs. 10,00,000 or more by any other mode • A Banking Company,

• Co- operative Bank,

• Any Institution issuing Credit Card

8 Receipt from any person of an amount agregating to Rs.10,00,000 or more for acquiring bonds or debentures issued. • Company or Institution issuing bonds or debentures
9 Receipt from any person of an amount aggregating to Rs. 10,00,000 or more in a year for acquiring shares issued by the company (including share application money) • Company issuing shares
10 Buy back of shares from any person (other than the shares bought in the open market) for an amount or value aggregating to Rs. 10,00,000 or more in a year. • A company listed on a
recognised stock exchange
11 Receipt of an amount aggregating Rs.
10,00,000 or more for acquiring units of one or more schemes of a Mutual Fund. (other than switching of funds from one scheme to another)
•Trustee of a Mutual Fund
12 Receipt from any person for sale of foreign currency or expense in such currency through a debit or credit card or through issue of travellers cheque or draft or any other instrument of an amount aggregating to Rs. 10,00,000 or more in a year • Authorized Dealer, Money Changer, Off-shore Banking Unit or any other person defined in FEMA, 1999
13 Purchase or sale by any person of immovable property for an amount of Rs.
30,00,000 or more or valued by the stamp
valuation authority referred to in section
50C of the Act at Rs. 30,00,000 or more.
• Inspector-General or Sub- Registrar appointed under Registration Act, 1908
14 Receipt of cash payment exceeding Rs.
2,00,000 for sale of goods or providing services of any nature other than those specified above
• Any person who is liable for audit under section 44AB of the Act

Rule 114E(1) prescribes Form 61A to report Specified Financial Transaction.13 types of Transactions are notified along with the monetary Limit which are registered or recorded by Specified Persons on or after 1st April 2016. The First Step in preparation of statement of financial transaction (SFT) is to identify transactions/persons/accounts, which are reportable under Rule 114E In the second Step, the reporting person is to submit the details of transactions which are determined as reportable.

AGGREGATION RULE:

Aggregation rule needs to be applied for specified transaction types to identify transactions/persons/accounts, which are reportable. Rule 1 14E specifies that the reporting person shall, while aggregating the amounts for determining the threshold amount for reporting in respect of any person –

  1. take into account all the accounts of the same nature maintained in respect of that person during the financial year;
  2. aggregate all the transactions of the same nature recorded in respect of that person during the financial year;
  3. attribute the entire value of the transaction or the aggregated value of all the transactions to all the persons, in a case where the account is maintained or transaction is recorded in the name of more than one person;

The aggregation rule is applicable for all transaction types except SFT- 012 (Purchase or sale of immovable property) and SFT- 013 (Cash payment for goods and services).

PERIODICITY AND DUE DATE OF FURNISHING STATEMENT OF FINANCIAL TRANSACTION:

The statement of financial transactions (online return in form 61A with digital signature) shall be furnished on or before 31st May, immediately following the financial year in which the transaction is registered or recorded.

However, section 285BA (5) empowers the tax authorities to issue a notice to the person who had not filed the statement within the prescribed time. In such cases, the tax authorities may serve upon such person a notice requiring him to furnish the statement within a period of not exceeding 30 days from the date of such notice and in such a case the person shall furnish within the time as specified In the notice.

CONSEQUENCES OF NOT FURNISHING STATEMENT OF FINANCIAL TRANSACTION:

Non-furnishing of statement of financial transaction or reportable account will attract penalty under section 271FA. If a person, who is required to furnish an annual information return, fails to furnish such return within the time prescribed, the income-tax authority may direct that such person shall pay, by way of penalty, a sum of one hundred rupees for every day during which such failure continues:

Provided that where such person fails to furnish the return within the period specified in the notice issued by tax authority on failure to furnish the return, he shall pay, by way of penalty, a sum of five hundred rupees for every day during which the failure continues, beginning from the day immediately following the day on which the time specified in such notice for furnishing the return expires.”.

FAILURE TO CORRECT INACCURATE OR DEFECTIVE STATEMENT OF FINANCIAL TRANSACTION OR REPORTABLE ACCOUNT FILED

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 in such manner as may be prescribed. 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. However, if a person fails to rectify the defect within the said period than such statement shall be treated as an invalid statement and the provisions of this Act shall apply as if such person had failed to furnish the statement.

CONSEQUENCES OF FILING INACCURATE OR DEFECTIVE STATEMENT OF FINANCIAL TRANSACTION OR REPORTABLE ACCOUNT:

As per section 271FAA of the Income-tax Act, if a prescribed reporting financial institution referred to in Section 285BA(1)(k) who is required to furnish statement of financial transaction or reportable account, provides inaccurate information in the statement, and where: (a) the inaccuracy is due to a failure to comply with the due diligence requirement prescribed* under section 285BA(7) or is deliberate on the part of that person; (b) the person knows of the inaccuracy at the time of furnishing the statement but does not inform the prescribed income-tax authority or such other authority or agency; (c) the person discovers the inaccuracy after the statement is furnished and fails to inform and furnish correct information within a period of 10 days as specified under section 285BA(6), then, the prescribed income-tax authority may direct that such person shall pay, by way of penalty, a sum of fifty thousand rupees.

Author Bio

Qualification: CA in Job / Business
Company: PSACS
Location: Noida, New Delhi, IN
Member Since: 23 May 2017 | Total Posts: 1

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Category : Income Tax (24682)
Type : Articles (13219)
Tags : AIR (82) black money (663) SFT (34)

2 responses to “High-Value Transactions Under Scanner”

  1. Company Director says:

    whether nil return to be filed by companies if no cash above 2 lakhs received?

    • pratik arora says:

      No. As per section , it is not mandatory to file the return if there is no transaction that is reportable.
      Also, rule 114E of the income tax rules 1962 also does not compels the filing of return in form 61A.

      Only preliminary response can be filed .

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