Transparent Taxation – SFT ( Specified Financial Transactions )

What is SFT ?

SFT (Specified Financial Transactions) or (Statement of Financial Transactions), is report filed by ‘specified persons’ under Section 285BA of Income Tax Act, 1961 which record transactions exceeding threshold limit including investment and expenditure done by taxpayers in FY.

Such specified persons who register, maintain or record such specified financial transaction are under a mandate to submit SFT to the income tax authority or such other specified authority or agency.

Under existing reporting system, Banks and Financial Institutions used to share information about high value transactions recorded in SFT’s with tax authorities.

In July 2020, the government had launched a revised form 26AS which included high value transactions from SFT’s from this assessment year, which would now be directly visible to the taxpayer.

Specified transaction required to be reported

-Transaction of purchase, sale/ exchange of goods or property or right or interest in a property; or

-Transaction for rendering any service; or

-Transaction under a works contract; or

-Transaction by way of an investment made or an expenditure incurred; or

-Transaction for taking or accepting any loan or deposit

-Nature and value of specified transaction required to be reported and specified persons who are required to report

-Cash Deposits > ₹ 10 lac in saving bank account

-Purchases of bank drafts, pay orders, etc > ₹ 10 lac in FY

-Cash payment made for FD > ₹ 10 lac in a FY

-Cash deposit or withdrawal > ₹ 50 lac current account in a FY

-Cash received > ₹ 2 lac for sale of goods or rendering of services

-Expenditure in foreign currency via debit card, credit card or travelers cheque > ₹ 10 lac in FY

-Payment by credit card > ₹ 10 lac on FY

-Credit Card bill paid in cash > ₹ 1 lac in FY

-Purchase / sale of immovable property, stamp duty value > ₹ 30 lac

-Mutual Funds investments > ₹ 10 lacs in FY

-Purchase of bonds or debentures < ₹ 10 lacs in FY

-Purchase of shares through Public Offer or right issue > ₹ 10 lacs

-Share buy-back from a person > ₹ 10 lacs

What forms to be used for furnishing SFT and what is the procedure to submit SFT?

SFT shall be submitted either in Form 61A (other reporting entities) or Form 61B (prescribed reporting financial institution).

SFT shall be submitted electronically, under digital signature certificate to the Director of Income-tax (Intelligence and Criminal Investigation) or the Joint Director of Income-tax (Intelligence and Criminal Investigation). A Post Master General or a Registrar or an Inspector General may furnish SFT in a computer readable media being a Compact Disc or Digital Video Disc (DVD), along with the verification in Form-V on paper.

SFT shall be submitted through following procedure:

If already registered on e-filing portal, log in and go to My Account>Manage ITDREIN (Income Tax Department Reporting Entity Identification Number)

Click on ‘Generate New ITDREIN’

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

Go to e-file>Upload Form ‘X’ (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

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

Compulsory Filing of Return

The Government also proposes compulsory filing of returns by :-

-A person having bank transactions over ₹ 30 lacs

-Payment of rent over ₹ 40,000/-

-All professionals and businesses having turnover over ₹ 50 lacs.

Due date of furnishing SFT

SFT in Form 61A shall be submitted on or before 31 May of the FY, immediately following the FY in which the transaction is recorded or registered. In case of financial transactions recorded or registered in FY 2018-19, the due date for furnishing SFT is 31 May 2019.

Statement of reportable account in Form 61B shall be submitted by prescribed reporting financial institution for every calendar year on or before 31 May of next year.

What is the remedy available if there is defect in the SFT submitted?

In case if the SFT filed is considered to be defective by the concerned income-tax authority, same shall be intimated to the reporting entity/person by such authority and an opportunity for rectifying the defect within a period of 30 days from the date of such intimation shall be given. This due date for rectification of default can be extended further by income tax authority at his discretion on an application made in this behalf. However, if defect is not rectified within 30 days or such extended period, such statement shall be treated as invalid and consequences of non-furnishing of SFT shall apply.

Failure to furnish SFT :-

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 reporting person does not furnish the SFT within original due date, penalty of Rs. 500 per day of default. Further, if no report is furnished even within the extended due date specified in the notice served upon the person, penalty of Rs 1000 per day will be levied from the day immediately following the day on which the specified time in the notice expires.

Overall, penalty of Rs 500 per day from the expiry of original due date till due date mentioned in the notice and Rs 1,000 per day beyond the due date specified in the notice.