Central Board of Direct Taxes has issued a corrigendum to Notification No. 4 of 2021, dated November 15, 2023. This amendment outlines crucial changes in the format, procedure, and guidelines for the submission of the Statement of Financial Transactions (SFT) concerning Mutual Fund Transactions by Registrar & Share Transfer Agents (RTAs).
1. Submission Frequency Update: The change in submission frequency from a quarterly to a half-yearly basis starting from April 1, 2023, is a significant shift. This modification acknowledges the need for a less frequent reporting cycle, providing businesses and entities involved in mutual fund transactions more time for accurate data preparation and submission. It aligns with the government’s aim to streamline reporting processes and enhance efficiency.
2. Minimum Holding Period Clarification: Annexure A provides clarity on the minimum holding period for different asset classes, specifically focusing on the Unit of Equity Oriented Mutual Fund (EMF), Unit of UTI, and Other Units (OTU). By specifying a 12-month holding period for EMF and UTI units, and a 36-month period for OTU, the notification aims to bring consistency and transparency to the treatment of various asset classes.
3. Additional Notes on Minimum Holding Period: The notification introduces an important nuance regarding cases where more than 35% of total proceeds are invested in the equity shares of domestic companies. This information is now deemed essential for reporting purposes. The consequential classification of such investments as short-term capital assets, applicable from April 1, 2023, is a crucial point for investors and entities to consider. This classification could impact taxation and financial planning strategies.
Conclusion: The corrigendum to Notification No. 4 of 2021 introduces critical updates to the submission process for the Statement of Financial Transactions (SFT) related to Mutual Fund Transactions by Registrar & Share Transfer Agents (RTAs). The shift to a half-yearly submission schedule and the nuanced guidelines on the minimum holding period underscore the need for careful compliance. Mutual fund industry participants and RTAs should promptly adapt to these changes to ensure seamless adherence to the revised regulations.
Also Read: Revised Procedure for submission of SFT for Depository Transactions
Government of India
Ministry of Finance
Central Board of Direct Taxes
Directorate of Income Tax (Systems), New Delhi
Corrigendum to Notification No. 4 of 2021 Dated: 15/11/2023
Format, Procedure and Guidelines for submission of Statement of Financial Transaction (SFT) for Mutual Fund Transactions by Registrar & Share Transfer Agent
The format, procedure and guidelines for submission for SFT data for mutual fund transactions by registrar and share transfer Agents (RTA) were notified vide Notification no. 4 of 2021 dated 30th April 2021 as mandated by Section 285BA of the Income Tax Act and Rule 114E sub-rule 5A. The notification lists various files, file formats, data types for different data fields that need to be reported, and various DQ rules that should be validated by RTA before submission of the data.
2. Subsequently, discussions were held with the representatives of Depositories ,RTAs and Exchanges. Accordingly, the following changes are made to the said notification.
3. The S. No. 6 of the existing notification mentions the following
“The statement of financial transactions relating to Financial Year 2020-21 shall be furnished on or before the 31st May 2021. Thereafter, the statement of financial transactions relating to the quarter ending 30th June, 31st September, 31st December and 31st March shall be furnished on or before 25th of July, October, January and April respectively.”
This should be read as following:
“With effect from 1st April 2023 the statement of financial transactions data will be submitted on half yearly basis instead of existing quarterly basis i.e. data relating to 1st half of the Financial Year ending 30th September and remaining half of the Financial Year ending on 31st March shall be furnished on or before 31st of October and 30th of April respectively.”
4. In Annexure A (Guidelines for Preparation of Statement of Financial Transactions (SFT), S.No. 7 mentions the specified minimum period of holding for different asset class is as under:
|
Security Class Code |
Security Class Description | Minimum Period of Holding |
| EMF | Unit of Equity Oriented Mutual Fund | 12 months |
| UTI | Unit of UTI | 12 months |
| OTU | Other Units | 36 months |
This should be read as :
| Security Class Code | Security Class Description | Minimum Period of Holding | Remarks |
| EMF | Unit of Equity Oriented Mutual Fund | 12 months | – |
| UTI | Unit of UTI | 12 months |
Where more than 35% of its total proceeds are invested in the equity shares of domestic companies, this information should be provided. Note: Where not more than 35% of its total proceeds are invested in the equity shares of domestic companies, (Specified Mutual Fund), it will always be classified as |
| OTU | Other Units | 36 months |
Where more than 35% of its total proceeds are invested in the equity shares of domestic companies, this information should be provided. Note: Where not more than 35% of its total proceeds are invested in the equity shares of domestic companies, (Specified Mutual Fund), it will always be classified as short-term capital asset (Applicable from 1st April 2023) |
(AMITAV)
DGIT(Systems), Delhi
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