The Income Tax Act of India has introduced a new concept of filing a Statement of Financial Transactions (SFT) to track taxpayers and their high-value transactions, which was formerly known as the Annual Information Return (AIR). With this statement under Section 285BA of the Income Tax Act, the Indian government has attempted to control the issue of black money.
Do you have any questions about the significance of SFT transactions in Form 26AS while submitting your taxes? This article will provide you with a comprehensive overview of the transactions that are available and how to submit them.
What is statement of financial transaction (SFT)?
The Income-tax Law has defined the notion of a statement of financial transaction or reportable account to keep track of high-value transactions carried out by the taxpayer. The tax authorities will use the statement to collect information on certain prescribed high-value transactions that a person made during the year. Certain prescribed entities (discussed later) are required to file a statement of financial transaction or reportable account, in which they must include details of specified financial transactions or any reportable account registered/recorded/maintained (discussed later) by them during the year.
The Income-tax Department keeps track of specified financial transactions carried on by a person during the year based on information submitted by certain prescribed entities in a statement of financial transaction or reportable account. This section will teach you about numerous provisions relating to a financial transaction statement or a reportable account.
Specified entities (Filers) are required to furnish a statement of financial transaction or reportable account (hereinafter referred to as’statement’) to the income-tax authority or such other prescribed authority in respect of specified financial transactions or any reportable account registered/recorded/maintained by them during the financial year under Section 285BA of the Income Tax Act, 1961.
The following is a summary of the notification regarding the Statement of Financial Transactions (SFT) for Interest Income:
- The CBDT prescribes the guidelines for preparing and submitting Statement of Financial Transactions (SFT) information for Interest income with this notification.
- The data must be saved in a data file before being uploaded. This notification also includes the data structure and validation rules.
Persons who are obligated to file a financial transaction statement or a reportable account
The following persons must provide a statement of financial transactions or reportable accounts to the prescribed authority during a financial year:
(a) An assesse;
(b) The prescribed person in the case of a Government office;
(c) A local authority or other public body or association;
(d) The Registrar or Sub-Registrar appointed under section 6 of the Registration Act, 1908 (16 of 1908);
(e) The Registrar or Sub-Registrar appointed under section 6 of the Registration Act, 1908.
f) The Post Master General, as defined in clause (j) of section 2 of the Indian Post Office Act, 1898 (6 of 1898);
g) the Collector, as defined in clause (g) of section 3 of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation, and Resettlement Act, 2013 (30 of 2013);
h) the recognized stock exchange, as defined in clause (f) of section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956);
I) A Reserve Bank of India officer appointed under section 3 of the Reserve Bank of India Act, 1934 (2 of 1934);
(j) A depository referred to in clause (e) of sub-section (1) of section 2 of the Depositories Act, 1996 (22 of 1996); or
(k) A required reporting financial institution
Who is in charge of reporting SFT Specified Transactions?
The Central Board of Direct Taxes (CBDT) has the jurisdiction under Section 285BA of the Income Tax Act to prescribe valuations against various specified financial transactions for specific individuals involved in such transactions. The following describes the CBDT’s prescribed format for SFT transactions in Form 26AS as outlined in Rule 114E.
|SI.NO||NATURE & VALUE OF TRANSACTION||CLASS OF PERSON (reporting person)|
|1||(a) A cash payment for the acquisition of bank draughts, pay orders, or banker’s cheques totaling Rs. 10 lakh or more in a financial year. (b) Cash payments totaling Rs. 10 lakh or more made during the financial year for the acquisition of Reserve Bank of India-issued pre-paid instruments. (c) Cash deposits or withdrawals (including by bearer’s cheque) in or from one or more current accounts of a person totaling Rs. 50 lakh or more in a financial year.||Co-operative bank or a banking company|
|2||A person’s cash deposits in one or more accounts (other than a current account and time deposit) totaling Rs. 10 lakh or more in a financial year.||(i) A commercial bank or a cooperative bank (ii) General Postmaster|
|3||One or more time deposits of a person totaling Rs. 10 lakh or more in a financial year (other than a time deposit made through renewal of another time deposit).||(i) A commercial bank or a cooperative bank (ii) General Postmaster (iii)Non-banking financial company (iv) Nidhi Company|
|4||Payments of an amount totaling— made by any person Rs. 1 lakh or more in cash; or ii) Rs. 10 lakh or more in any other way, in a financial year, against bills raised in relation to one or more credit cards issued to that person.||A credit card is issued by a bank, a cooperative bank, or any other organization or organization.|
|5||In a financial year, receipt from any individual of an amount of Rs. 10 lakh or more for the purpose of acquiring bonds or debentures issued by the company or institution (other than the money received on account of the company’s bond or debenture being renewed)||Bonds or debentures are issued by a firm or organization.|
|6||In a financial year, receipt from any person of an amount totaling Rs. 10 lakh or more for acquiring shares (including share application money) issued by the corporation.||A corporation is issuing stock.|
|7||In a financial year, buy back shares from any individual (other than those purchased on the open market) for an amount or value totaling Rs. 10 lakh or more.||Section 68 of the Companies Act, 2013 allows a firm listed on a recognized stock exchange to purchase its own securities.|
|8||Receipt from any person of a payment of Rs. 10 lakh or more in a financial year for the purpose of acquiring units in one or more Mutual Fund schemes (other than the amount received on account of a transfer from one Mutual Fund scheme to another).||A Mutual Fund trustee or other person in charge of the Mutual Fund’s affairs|
|9||During a financial year, any receipt for the sale of foreign currency, including any credit of such currency to a foreign exchange card, or any expense in such currency through a debit or credit card, or through the issue of a travelers cheque, draught, or other instrument totaling Rs. 10 lakh or more.||The Foreign Exchange Management Act of 1999 appoints an authorised person.|
|10||Any individual who buys or sells immovable property for Rs. 10 lakh or more, or is valued at Rs. 30 lakh or more by the stamp valuation body referred to in section 50C of the Act.||Under the Registration Act of 1908, an Inspector-General, Registrar, or Sub-Registrar is appointed.|
|11||Receipt of a cash payment in excess of Rs. 2 lakh for the sale of products or services of any kind by anyone (other than those specified at Sl. Nos. 1 to 10 of this rule, if any.)||Anyone who is subject to audit under the Act’s section 44AB.|
|12||Cash deposits of Rs. 12,50,000 or more in one or more current accounts of a person during the period 9 November 2016 to 30 December 2016; or Rs. 2,50,000 or more in one or more accounts (other than current accounts) of a person.||(i)A banking firm or cooperative bank that is subject to the Banking Regulation Act of 1949. (ii) Post Master General, as defined in section 2 of the Indian Post Office Act, 1898, clause (j).|
|13||Cash deposits in this account between 9th November, 2016 and 30th December, 2016 aggregating to— I Rs. 12,50,000 or more, in one or more current accounts of a person; or (ii) Rs. 2,50,000 or more, in one or more accounts (other than current accounts) of a person.||(i)A banking firm or cooperative bank that is subject to the Banking Regulation Act of 1949. (ii) Post Master General, as defined in section 2 of the Indian Post Office Act, 1898, clause (j).|
What Is the SFT Submission Process?
Taxpayers must use either Form 61A or Form 61B to file SFT. The entire process is done electronically, and the Director or Joint Director of Income-tax receives a digital signing certificate. These are overseen by a Post Master General, Registrar, or Inspector General. On addition, you can file an SFT transaction in Form 26AS by following the steps below.
Step 1: Go to the IRS e-filing website and create an account. After that, go to My Account and log in using your credentials.
Step 2: Select Manage ITDREIN from the drop-down menu (Income Tax Department Reporting Entity Identification Number). After that, select ‘Generate New ITDREIN’.
Step 3: Next, you must choose the reporting entity’s form type and category. After that, select ‘Generate ITDREIN’ from the drop-down menu.
Step 4: Your ITDREIN will be generated, and a confirmation SMS and email will be sent to your registered mobile number and email address.
Step 5: Go to the e-file and click on ‘Upload Form __’ after this ITDREIN appears in your account (Appropriate Form No based on your selection). This will take you to a new form.
Step 6: Double-check the PAN, Form Name, Reporting Entity Category, Financial Year, Half-year, and other information. Keep your documents close at hand to ensure that you enter the correct information.
Step 7: Once the details have been successfully validated, upload them along with your digital signature certificate. You will receive confirmation emails informing you whether or not your uploaded file was accepted.
Now that you’ve learned how to submit an SFT file, you’re probably wondering when the deadline is. On or before the 31st of May of the fiscal year, you must submit SFT in Form 61A. SFT files in Form 61B must be submitted on or before the 31st of May of the following year for each calendar year.
What are the ramifications of failing to file a financial transaction statement or a reportable account?
Section 271FA imposes a penalty for failing to provide a statement of financial transaction or a reportable account. A penalty of Rs. 500 each day of default can be imposed.
However, as previously stated, section 285BA(5) empowers the tax authorities to give a notice to the person ordering him to file the statement within 30 days of the date of service of the notice, and in such a case, the person must file the statement within the time specified in the notice.
If a person fails to file the statement within the prescribed period, a penalty of Rs. 1,000 per day will be charged starting on the day after the time stated in the notification for filing the statement expires.
What Should You Do If The SFT You Submit Is Defective?
It is critical to avoid mistakes and errors when working with SFT transactions in Form 26AS. If the related income tax authorities discover that these files are defective, they must notify the reporting person or people who have the authority to correct the problem. They must correct the errors within 30 days after receiving such notification.
If an application is lodged in advance, the applicable income tax body can extend the required date for rectification of the statement of financial transaction. SFT statements will become invalid if the concerned taxpayer does not correct the defect within 30 days or the extended term. In this instance, charges and penalties for SFT non-furnishing may apply.
The Rule of Aggregation
As stated above, the monetary threshold for the specified transactions must be computed. The following are the rules for aggregating according to the statement of financial transaction:
- When determining the aggregate value, all accounts of the same type must be considered. For example, suppose a person has three savings accounts, each with a balance of Rs. 3 lakhs. The total amount in all three savings accounts must be taken into consideration when determining the threshold limit.
- For the purposes of computing the SFT income tax threshold limit, all transactions of the same sort will be considered. For example, if a person bought shares worth Rs. 2 lakhs in September and Rs. 3 lakhs in October of the same financial year, the value of the shares for both months will be used to determine the threshold limit.
- 3. If a joint account is kept or a transaction occurs in the names of two people, the total amount will be attributed to each of them separately. For example, if A and B have a joint savings account of 3 lakhs and a savings account of 7 lakhs, a total of 10 lakhs will be ascribed to both of them separately to determine the threshold limit under section 285BA of Income Tax Act.
Customers’ high-value transactions must be tracked by the government. The Government of India issued the Statement of Financial Transactions for this purpose, in order to protect the Indian economy from black money. The SFT must be submitted to the income tax authority by the indicated persons. The government has also released a list of specified persons for various types of transactions, as well as their respective threshold limits.
As a responsible taxpayer if you need help in submitting your statement of financial transaction i.e SFT then get in touch with our experts https://www.phoenixtax.in/ today!