May 6, 2022

Statement of Financial Transactions (SFT)

To keep a watch on high value transactions and track undisclosed income, the Income-tax Law framed the concept of Statement of financial transaction or reportable account. Specified entities are mandated to report certain financial transactions during the year in the prescribed format.

Basic Provision

Section 285BA of the Income Tax Act,1961 stipulates specified entities to furnish a statement of financial transaction or reportable account in respect of specified financial transactions or reportable account registered/recorded/maintained by them during the financial year to the income-tax authority or such prescribed authority.

Who are required to file SFT or RA?

Below listed persons are required to furnish the statement of financial transactions or reportable accounts registered or recorded or maintained by them during a financial year:

(a) an assessee;
(b) the prescribed person in the case of an office of Government;
(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 registering authority empowered to register motor vehicles under Chapter IV of the Motor Vehicles Act, 1988 (59 of 1988);
(f) the Post Master General as referred to in clause (j) of section 2 of the Indian Post Office Act, 1898 (6 of 1898);
(g) the Collector referred to 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 recognised stock exchange referred to in clause (f) of section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956);
(i) an officer of the Reserve Bank of India, constituted 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 prescribed reporting financial institution
(l) a person, other than those referred to in clause (a) to (k), as may be prescribed.

What transactions are required to be reported?

Transaction details

Reporting Person

1. Payment made in cash for purchase of bank drafts or pay orders or banker’s cheque of an amount aggregating to Rs. 10 lakh or more in a financial year

A banking company or a cooperative Bank

2. Payments made in cash aggregating to Rs. 10 lakh or more during the financial year for purchase of pre-paid instruments issued by Reserve Bank of India

A banking company or a cooperative Bank

3. Cash deposits or cash withdrawals (including through bearer’s cheque) aggregating to Rs. 50 lakh or more in a financial year, in or from one or more current account of a person

A banking company or a cooperative Bank

4. Cash deposits aggregating to Rs. 10 lakh or more in a financial year, in one or more accounts (other than a current account and time deposit) of a person

– A banking company or a cooperative Bank
-Post Master General

5. One or more time deposits (other than a time deposit made through renewal of another time deposit) of a person aggregating to Rs. 10 lakh or more in a financial year of a person

– A banking company or a cooperative Bank
-Post Master General
-Nidhi Company
-NBFC

6. Payments made by any person of an amount aggregating to:
(a) Rs. 1 lakh or more in cash; or
(b) Rs. 10 lakh or more by any other mode, against bills raised in respect of one or more credit cards issued to that person, in a financial year

A banking company or a cooperative bank or any other company or institution issuing credit card

7. Receipt from any person of an amount aggregating to Rs. 10 lakh or more in a financial year 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)

A company or institution issuing bonds or debentures

8. Receipt from any person of an amount aggregating to Rs. 10 lakh or more in a financial year for acquiring shares (including share application money) issued by the company

A company issuing shares

9. Buy back of shares from any person (other than the shares bought in the open market) for an amount or value aggregating to Rs. 10 lakh or more in a financial year

A company listed on a recognised stock exchange purchasing its own securities under section 68 of the Companies Act, 2013

10. Receipt from any person of an amount aggregating to Rs. 10 lakh or more in a financial year 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)

A trustee of a Mutual Fund or such other person managing the affairs of the Mutual Fund

11. 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 of an amount aggregating to Rs. 10 lakh or more during a financial year

Authorised person under Foreign Exchange Management Act, 1999

12. Purchase or sale by any person of immovable property for an amount of Rs. 10 lakh or more or valued by the stamp valuation authority referred to in section 50C of the Act at Rs. 30 lakh or more

Inspector-General or Registrar or Sub-Registrar appointed under the Registration Act, 1908

13. Receipt of cash payment exceeding Rs. 2 lakh for sale, by any person, of goods or services of any
nature (other than those specified at Sl. Nos. 1 to 12 of this rule, if any.)

Any person who is liable for audit under section 44AB of the Act

14. Cash deposits during the period 9th November, 2016
to 30th December, 2016 aggregating to—
(i) Rs. 12,50,000 or more, in one or more current account of a person; or
(ii) Rs. 2,50,000 or more, in one or more accounts (other than a current account) of a person.

– A banking company or a cooperative bank to which the Banking Regulation Act, 1949 applies
– Post Master General as referred to in clause (j) of section 2 of the Indian Post Office Act, 1898

15. Cash deposits during the period 1st of April, 2016 to
9th November, 2016 in respect of accounts that are reportable under SI.No.14 because cash deposited in this account between 9th November, 2016 to 30th December, 2016 aggregating to—
(i) Rs. 12,50,000 or more, in one or more current account of a person; or
(ii) Rs. 2,50,000 or more, in one or more accounts (other than a current account) of a person.

– A banking company or a cooperative bank to which the Banking Regulation Act, 1949 applies
– Post Master General as referred to in clause (j) of section 2 of the Indian Post
Office Act, 1898

16. Capital gains on transfer of listed securities or 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

17. Dividend Income

-A company

18. Interest Income

-A Banking company or a Co-op. Bank to which the Banking Regulation Act, 1949 (10 of 1949) applies (Including any bank or banking institution referred to in section 51 of that Act);
-Post Master General as referred to in section 2(j) of the Indian Post Office Act, 1898;
-Non-banking financial company which holds a certificate of registration under section 45-IA of the Reserve Bank of India Act, 1934 (2 of 1934), to hold or accept deposit from public

The CBDT, vide Income-tax (4th Amendment) Rules, 2021, enhanced the scope of nature of transactions to be reported under Statement of Financial Transaction (SFT) as per Rule 114E by including the transactions under No. 16,17 & 18 above, for the purpose of pre-filling the Income-Tax Return.

What is the due date to furnish statement of financial transaction or reportable account?

The statement shall be furnished on or before 31st May immediately following the financial year in which the transaction is registered or recorded.

However, the statement of financial transaction in respect of the transactions listed at number 14 and 15 in the Table given above, had to be furnished on or before the 31st day of January, 2017. Section 285BA (5) empower the tax authorities to issue a notice to the person who had not filed the statement within due date. In such a case, the tax authorities may serve upon such person a notice requiring him to furnish the statement within a period not exceeding 30 days from the date of service of such notice and in such a case the person shall furnish the statement within the time as specified in the notice.

How does it affect a common man?

Objective of SFT or RA is to track financial transactions that are otherwise not reported by an assessee. Even if an individual earns income by not paying tax and deposits the amount in bank (or in any other specified entity), the bank (or the specified entity) shall report to the tax authorities based on which the Dept can issue notice seeking explanation for non-disclosure.