Short note on SFT – Statement of Financial Transactions considering Recent CBDT Notification No. 16/2021, dated 12-03-2021 with penalty provisions

SFT provides a reporting mechanism wherein specified entities are required to provide information about material financial transactions to the Income-tax Department. While Presenting Union Budget 2021, the Hon’ble finance Minister mentioned that to ease filing of returns of income (ITR), details of capital gains from listed securities, dividend income, and interest from banks, post office, etc. earned by the taxpayer during the year will be pre-filled in his ITR. Recently, CBDT, notified Income-tax (4th Amendment) Rules, 2021 vide Notification No. 16/2021, dated 12-03-2021 to enhance the scope of the transactions to be reported under Statement of Financial Transaction (SFT) as per Rule 114E. Vide said notification scope of Statement of Financial Transactions (SFT) has been expanded.

Transactions liable to be reported in SFT

Transactions liable to be reported in SFT can now be classified in two categories:

  • Reporting of Transactions without any threshold limit
  • Reporting of transactions above threshold limit

1. Reporting without any threshold limit

Following ‘Specified Financial Transaction’ are required to be reported by the specified person “Reporting Entity”. No threshold limit is prescribed for following transactions.

Sl. No. Nature of transaction Reporting entity
1. Capital Gains on transfer of securities listed on any recognised stock exchange in India ♦ Recognised Stock Exchange;

♦ Depository as defined in section 2(1)(e) of Depositories Act, 1996;

♦ Recognised Clearing Corporation;

♦ Registrar to an issue and share transfer agent registered under section 12(1) of the SEBI Act, 1992.

2. Capital Gains on transfer of Units of Mutual Funds ♦ Recognised Stock Exchange;

♦ Depository as defined in section 2(1)(e) of Depositories Act, 1996;

♦ Recognised Clearing Corporation;

♦ Registrar to an issue and share transfer agent registered under section 12(1) of the SEBI Act, 1992.

3. Dividend income (Final or Interim) A Company
4. Deemed Dividend as referred to under Section 2(22)(a) to (e) A Company
5. Interest income ♦ A Banking company or a Co-op. Bank;

♦ Post Master General;

♦ NBFCs

2. Reporting above the threshold limit

Following ‘Specified Financial Transaction’ are required to be reported under this provision if the value of the transaction exceeds the threshold limit, and it is registered or recorded by the specified person:

Sl. No. Nature of Transaction Value of Transaction Reporting Entity
Cash Transactions
1. Cash payment for purchase of bank drafts or pay orders or banker’s cheque. If aggregate payment is Rs. 10 lakhs or more in a financial year. Bank or Co-op. Bank
2. Cash payment for purchase of pre-paid instruments issued by the RBI If aggregate payment is Rs. 10 lakhs or more in a financial year Bank or Co-op. Bank
3. Cash deposits in one or more current account of a person If aggregate amount is Rs. 50 lakhs or more in a financial year Bank or Co-op. Bank
4. Cash withdrawals (including through bearer’s cheque) from one or more current account of a person If aggregate amount is Rs. 50 lakhs or more in a financial year Bank or Co-op. Bank
5. Cash deposits in one or more accounts (other than current account and time deposit) of a person If aggregate amount is Rs. 10 lakhs or more in a financial year ♦ Bank or Co-op. Bank

♦ Post Master General

6. Receipt of cash payment for sale, by any person, of goods or services of any nature, not being a transaction whose specific reporting is otherwise required If amount is more than Rs. 2 lakhs Any person who is liable for tax audit under Section 44AB
Credit Cards
7. Payment in cash for one or more credit cards issued to that person If aggregate payment is Rs. 1 lakh or more in a financial year Bank or Co-op. Bank or any other company or institution issuing credit card
8. Payment in any mode (other than cash) for one or more credit cards issued to that person If aggregate payment is Rs. 10 lakhs or more in a financial year Bank or Co-op. Bank or any other company or institution issuing credit card
Investments
9. One or more-time deposits (other than a time deposit made through renewal of another time deposit) of a person If aggregate amount is Rs. 10 lakhs or more in a financial year ♦ Bank or Co-op. bank

♦ Post Master General

♦ Nidhi Companies

♦ NBFCs

10. Receipt from any person for acquiring bonds or debentures issued by the company or institution (other than the amount received on account of renewal of the bond or debenture issued by that company) If aggregate amount is Rs. 10 lakhs or more in a financial year A company or institution issuing bonds or debentures
11. Receipt from any person for acquiring shares (including share application money) issued by the company If aggregate amount is Rs. 10 lakhs or more in a financial year A company issuing shares
12. Buy back of shares from any person (other than the shares bought in the open market) If aggregate amount is Rs. 10 lakhs or more in a financial year A company listed on a recognized stock exchange purchasing its own securities
13. Receipt from any person for acquiring units of one or more schemes of a Mutual Fund (other than the amount received on account of transfer from one scheme to another scheme of that Mutual Fund) If aggregate amount is Rs. 10 lakhs or more in a financial year A trustee of a Mutual Fund or such other authorized person managing the affairs of Mutual Fund
14. Purchase or sale by any person of immovable property If transaction value or valuation by Stamp Valuation Authority is Rs. 30 lakhs or more Inspector-General or Registrar or Sub-Registrar under the Registration Act, 1908
Foreign Currency Transactions
15. Receipt from any person for sale of foreign currency including credit of such currency to foreign exchange card If aggregate amount is Rs. 10 lakhs or more in a financial year ♦ Authorised Dealer

♦ Money Changer

♦ Offshore Banking Unit

♦ Any other person authorised to deal in foreign exchange or foreign securities

16. Expense in foreign currency through a debit or credit card or through issue of Travellers Cheque or Draft or any other instrument. Aggregating to 10 lakh rupees or more in a financial year.

Due date of Filling of SFT:

The Statement of Financial Transaction, in respect of a financial year, shall be furnished electronically under digital signature of the person responsible for verification of statement in Form No. 61A by Reporting entity. The Statement shall be furnished on or before 31st May, immediately following the financial year in which transaction is registered or recorded.

As per section 285BA of the Act, 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 .

Further, if any person who has furnished SFT, comes to know or discovers any inaccuracy in the information provided in the statement, he shall inform the inaccuracy in such statement and furnish the correct information to the income-tax authority or specified authority or agency within 10 days and furnish correct information

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. (Reference from Section 271FA of the Act)

As per provision of section 271FAA of Income Tax Act, penalty of Rs 50,000 will be levied on prescribed reporting financial institution if it provides inaccurate information in the statement where:

  • inaccuracy is due to a failure to comply with the prescribed due diligence requirement or is deliberate on the part of that person; or
  • the person knows of the inaccuracy at the time of furnishing the statement of financial transaction or reportable account, but does not inform the prescribed income-tax authority or such other authority or agency; or
  • the person discovers the inaccuracy after the statement of financial transaction or reportable account is furnished and fails to inform and furnish correct information within 10 days as mentioned above.

Author Bio

Qualification: CA in Job / Business
Company: N/A
Location: Ahmedabad, Gujarat, India
Member Since: 27 Mar 2021 | Total Posts: 2

My Published Posts

More Under Income Tax

Leave a Comment

Your email address will not be published. Required fields are marked *

Search Posts by Date

April 2021
M T W T F S S
 1234
567891011
12131415161718
19202122232425
2627282930