Income Tax Provisions in Respect of Filing of Statement of Financial Transaction (SFT)

1. Section 285BA:

Section 285BA of the Income Tax requires specified reporting persons to furnish statement of financial transaction. Rule 114E of the Income Tax Rules, 1962 specifies that the statement of financial transaction required to be furnished under sub-section (1) of section 285BA of the Act shall be furnished in Form No. 61A. As you all are aware that Budget 2020 widens scope of Statement of Financial Transactions (SFT). So therefore from this Financial Year 2020-21, the compliance will be more stringent.

2. Rule 114E

The nature of the transactions and the threshold value on or above which information has to submitted in the AIR are prescribed in Rule 114E.

Presently, in terms of Rule 114E (2), the specified persons who are required to furnish AIR and the nature and value of the specified transactions to be reported in the AIR are as under:

SI   No	Nature of transaction alongwith respective reporting person	Value of transaction
1	Cash payment purchase of bank drafts or pay orders or banker’s cheque reported by A banking company or a co-operative bank to which the Banking Regulation Act, 1949 applies	Aggregating to Rs 10 lakh or more in a FY
	Cash payments for purchase of pre-paid instruments issued by Reserve Bank of India and reported by A banking company or a co-operative bank to which the Banking Regulation Act, 1949 applies	Aggregating to Rs 10 lakh or more during the FY
	Cash deposits or Cash withdrawals (including through bearer’s cheque) in one or more current account of a person reported by A banking company or a co-operative bank to which the Banking Regulation Act, 1949 applies	Aggregating to Rs 50 lakh  or more in a FY
2	Cash deposits in one or more accounts other than a current account and time deposit of a person reported by A banking company or a co-operative bank to which the Banking Regulation Act, 1949 applies or by Post Master General	Aggregating to Rs 10 lakh or more in a FY
3	One or more time deposits (other than renewed time deposit of another time deposit) of a person reported by A banking company or a co-operative bank to which the Banking Regulation Act, 1949 applies or by Post Master General or by Nidhi companies or By NBFCs	Aggregating to Rs 10 lakh or more in a FY
4	Credit card payments made by any person either in cash or by any other mode in a Financial Year reported by A banking company or a co-operative bank to which the Banking Regulation Act, 1949 applies or any other company or institution issuing credit card	Aggregating to: Rs 1 lakh or more in cash or Rs 10 lakh or more by any other mode in a FY
5	Receipt from any person for acquiring bonds or debentures issued by the company or institution (other than renewal of the bond or debenture issued) reported by A company or institution issuing bonds or debentures	Aggregating to Rs 10 lakh or more in a FY
6	Receipt from any person for acquiring shares (including share application money) issued by the company and Reported by a company issuing shares	Aggregating to Rs 10 lakh  or more in a FY
7	Buyback of shares from any person (other than the shares bought in the open market) reported by a company listed on a recognised stock exchange purchasing its own securities	Aggregating to Rs 10 lakh  or more in a FY
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 of that Mutual Fund) reported by A trustee of a Mutual Fund or such other person managing the affairs of the Mutual Fund as may be duly authorised by the trustee in this behalf	Aggregating to Rs 10 lakh or more in a FY
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 travellers cheque or draft or any other instrument reported by Authorised person as referred to in clause (c) of section 2 of the Foreign Exchange Management Act, 1999	Aggregating to Rs 10 lakh or more during a FY
10	Purchase or sale of immovable property by any person reported by Inspector-General appointed under section 3 of the Registration Act, 1908 or Registrar or Sub-Registrar appointed under section 6 of that Act.	An amount of thirty lakh rupees or more or valued by the stamp valuation authority referred to in section 50C of the Act at thirty lakh rupees or more
11	Receipt of Cash payment for sale, by any person, of goods or services of any nature (other than those specified at Sl. Nos. 1 to 10) reported by any person who is liable for audit under section 44AB of the Act	Exceeding Rs 2 lakh

3. Time limit of filing of SFT:

Rule 114E (5) prescribes that the statement of financial transactions referred to in sub-rule (1) shall be furnished on or before the 31st May, immediately following the financial year in which the transaction is registered or recorded.

4. What is the Form for filing of SFT?

Under rule 114E (1), the statement of financial transaction required to be furnished under sub-section (1) of section 285BA of the Act shall be furnished in respect of a financial year in Form No. 61A.

5. Manner of Filing Statement of Financial Transaction

5.1 How to file Statement of Financial Transaction online?

• For SFT Preliminary Response submission and view facility kindly go to Reporting Portal (Use this link – https://report.insight.gov.in/reporting-webapp/portal/homePage )
• Register yourself on Reporting portal under My Account menu
• Please note that all statements uploaded to the Reporting Portal should be in the XML format consistent with the prescribed schema published by the Income-tax Department
• Once XML is generated, sign and encrypt the XML using the Submission utility and prepare package to be uploaded
• Submit the statement on Reporting Portal
• Upon successful submission, an email with “Acknowledgment Number” will be sent to the registered email id
• For more details, refer “SFT quick reference Guide” and “Reporting Portal User Guide” in Resources section of Reporting Portal.

5.2 How to Register on Reporting Portal for SFT filing

The Reporting Portal allows reporting entities to register themselves with the Income Tax Department (ITD). To access the portal, visit the URL: https://report.insight.gov.in

The step-by-step process to registering through this portal is as follows:

1. Log in on e-filing portal and select Reporting Portal under My Account

2. Select New Registration and click on Continue. (Entities who have already generated an ITDREIN but have not registered their Principal Officer on e-filing portal, shall select Manage Principal Officer).

3. Choose the relevant Form Type and Reporting Entity Category and click Next to continue.

4. On the Reporting Entity Detail Page, fill out the form accurately.

5. The fields under Sponsored Entity or Trustee Documented Trust only have to be filled if Form Type 61B is selected.

6. Once details are filled, Click Add Principal Officer button at the bottom.

7. On the new page, enter complete details of the Principal Officer.

8. User can “Submit” the form or may proceed to add “Designated Director”, ”Nodal Officer”, “Alternate Nodal Officer” and “Sub Users”.

9. Once all the users are added and upon clicking the Submit button, the following dialog box appears:

Your details have been successfully submitted. Please find the registration Request Number “xxxxxxxxxxxx”. An email has been sent to your registered email id. Download Acknowledgment PDF

Acknowledgement message will be displayed with link to download Acknowledgment PDF.

10. Upon successful registration, ITDREIN and user credentials will be sent to registered email id.

User can log in on Reporting Portal with communicated credentials.

5.3 What are different parts of Form 61A

Form 61A has two parts. Part A which contains statement level information is common to all transaction types.

The report level information has to be reported in one of the following parts (depending of the transaction type):

• Part B (Person Based Reporting)
• Part C (Account Based Reporting)
• Part D (Immovable Property Transaction Reporting)

6. Penalty For failure to furnish SFT

Penalty for failure to furnish statement of financial transaction or reportable account {Sec.271FA}:

1. Failure to furnish a Statement of Financial Transaction within the time prescribed u/s.285BA (2):- Sum of Rs.500/- for every day during which failure continues.
2. Failure to furnish a Statement of Financial Transaction within the time prescribed u/s.285BA (5):- Sum of Rs.1000/- for every day during which failure continues.

7. Analysis of Specified Financial Transactions

7.1. Cash deposits in a savings bank account

A banking company to which Banking Regulation Act, 1949 applies (including any bank or banking institution referred to in section 51 of that Act) is required to report the aggregate of all the cash deposits in any savings account of a person maintained in that bank if the aggregate of cash deposits in a financial year are Rs. 10 lakhs or more. It is to be noted that the provision applies to a bank and not the branch thereof.

7.2. Credit Card payments

A banking company to which Banking Regulation Act, 1949 applies (including any bank or banking institution referred to in section 51 of that Act) or any other company/institution issuing credit cards is required to furnish the aggregate of all payments of Rs. 10 lakhs or more in a financial year made by a credit card holder against bills raised in respect of a credit card issued to that person.

7.3 Investment in Units of Mutual Fund

A mutual fund is under an obligation to furnish in the AIR a receipt from any person of an amount of Rs. 10 lakhs or more for acquiring units of that fund. It has been clarified that the amount actually received from a transacting party, and not the amount relating to the allotment, is to be reported in the AIR.

7.4 Issue of bonds or debentures

A company or institution issuing bonds or debentures is under an obligation to furnish in the AIR a receipt from any person of an amount of Rs. 10 lakhs or more for acquiring bonds or debentures issued by that company or institution. The amount actually received from a transacting party, and not the amount relating to the allotment, is to be reported in the AIR.

7.5 Issue of shares in a public

If a company has received Rs. 10 lakh or more in respect of shares issued by that company through a public, the company has to furnish the details of such a transaction. Here also the amount actually received from a transacting party, and not the amount relating to the allotment, is to be reported in the AIR.

7.6 Purchase or sale of immovable property

The registering authority; i.e., Registrar or Sub-Registrar appointed u/s. 6 of the Registration Act, 1908 is required to furnish in the AIR purchase or sale of immovable property, the value of which is Rs. 30 lakhs or more. CBDT Circular has clarified that where the transaction in respect of a property valued at more than Rs. 30 lakhs involves joint parties and the value for one or more party is less than Rs. 30 lakhs, the transaction is to be reported in the AIR giving requisite details in respect of all such joint parties, even though the value of the transaction in the hands of one or more joint parties is less than Rs. 30 lakhs.

8. Defective Return, Notice and Compliance:

8.1 Section 285BA (4): Notice for defective return

Where the prescribed Income Tax Authority considers that the Annual Information Return furnished under sub-section (1) is defective, he may intimate the defect to the person who has furnished such return and give him an opportunity of rectifying the defect within a period of 30 days from the date of such intimation or within such further period, the authority may grant on an application in this regard. If the person fails to rectify the defect within the time allowed, the prescribed income tax authority will treat the return as invalid and all the
provisions of this Act shall apply as if such person has failed to furnish SFT.

8.2 Section 285BA(5): Compliance in response to notice

Where a person who is required to furnish an SFT has not furnished the same within the prescribed time, the prescribed Income Tax Authority may serve up on such person a notice requiring him to furnish such return within such period as laid down by such authority but not exceeding 30 days from the date of service of such notice.

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(Republished with Amendments by Team Taxguru)