The Indian economy has faced several threats. One of these major threats is the accumulation of black money. The Ministry of Finance and the Government of India have taken various measures to save the country from black money. So many initiatives have been taken, like widening the income tax brackets. The Government of India also announced the compulsion for the high authorities and government agencies to report the high-value transactions. In 2003, the submission of Annual Information Return (AIR) was also made mandatory for these specified persons to submit based on SFT section 285BA income tax act.
In 2014, the scope of specified persons was widened, and various other provisions were introduced in section 285BA. It was then renamed ‘obligation to furnish statement of financial transaction or reportable account.’ This article will learn more about SFT in income tax and section 285BA of the income tax act.
Did you know?
SFT is a part of form 26AS which has been in effect from 1st June 2020.
What Is a Statement of Financial Transactions?
SFT’s full form is Statement of Financial Transactions. SFT is a report to be filed by the ‘specified persons.’ The list of these specified persons is given in section 285BA of the Income Tax Act. This report includes the transactions, including investment and the expenditure that exceeds the threshold limit. The specified person registering for SFT must submit the SFT income tax to the government.
Specified Transactions Required to Be Reported
The financial transactions that are required to be reported under the SFT section 285BA are –
• Transactions of purchase and sales of the goods of property. It also includes exchanging goods or property and the right of interest in the property.
• Work contract transactions.
• Transactions involving accepting or taking loans and deposits.
• Transactions that involve providing services to the customers.
• Transactions made for making investments or any other expenditure.
Also Read: Understanding Section 234a of Income Tax Act: Meaning, Formula & Examples
Nature, Value and Person Responsible for Report Specified Transactions
As per section 285BA, the Central Board of Direct Taxes (CBDT) has prescribed the threshold limits for various transactions and the specified persons who have to submit the SFT income tax. Various nature of transactions provided by the CBDT is –
|
SI. No. |
Nature of a transaction to be reported |
Monetary threshold of transaction |
Specified person required to submit SFT |
|
1 |
Transactions and their threshold limit. |
Purchasing bank drafts or paying the banker’s cheque through cash - ₹10 lakhs or more in a financial year. • Purchasing pre-paid instruments in cash - ₹10 lakhs or more in a financial year. • Depositing cash in one or more current accounts of the same person - ₹50 lakhs or more in a financial year aggregately. • Withdrawal of cash from one or more current accounts of a person - ₹50 lakhs or more in a financial year aggregately. |
All the banking companies and the cooperative banks to which banking regulation applies |
|
2 |
Deposit cash in one or more accounts of a person other than the current account and the time deposits. |
₹10 lakhs or more in a financial year aggregately. |
All the banking companies and cooperative banks on which banking regulation applies and the Post-master general. |
|
3 |
One or more time deposit accounts opened by a person. |
₹10 lakhs or more in a financial year. |
• All the banking companies and cooperative banks to which banking regulation applies.
• The postmaster general.
• Nidhi Company, section 406 of The Companies Act, 2013. • Non-banking financial company. |
|
4 |
Payment of credit cards either in cash or in any other mode by a person. |
₹1 lakh or more if in cash and ₹10 lakhs or more in the case of any different method. |
• All the banking companies or cooperative banks on which banking regulation applies • Any other company that issues credit cards. |
|
5 |
Receiving cash for the issue of bonds or the debentures issued by the company. |
₹10 lakhs or more in a financial year aggregately. |
Any company or bank that issues credit cards. |
|
6 |
Receiving cash for issuing shares, including the share application money. |
₹10 lakhs or more in a financial year aggregately. |
Any company that issues shares. |
|
7 |
Buyback of shares except for the claims bought in the open market. |
₹10 lakhs or more in a financial year aggregately. |
Listed companies under section 68 of The Companies Act, 2013. |
|
8 |
Acquiring units of one or more mutual funds schemes, excluding the transfer from one scheme to another. |
₹10 lakhs or more in a financial year aggregately. |
Trustee of Mutual Fund Schemes or any other authorised person who manages the mutual fund affairs. |
|
9 |
Purchase or sale of immovable property. |
Stamp duty value or the transaction value as per section 50C of the Income Tax act or ₹30 lakhs, whatever is higher. |
The person appointed as the inspector general as per section 3 of The Registration Act, 1908. |
|
10 |
Cash receipts for the sale of goods or any other services (except those mentioned above). |
not exceeding ₹2 lakhs. |
Any person liable for audit as per Section 44AB of the Income Tax Act. |
The Aggregation Rule
The monetary threshold for the specified transactions must be calculated as stated in the above points. The rules for aggregating as per the statement of financial transaction are –
1. All the accounts of the same nature need to be considered for calculating the aggregate value. E.g., if a person has three savings accounts of ₹3 lakhs each. The amount in all three savings accounts needs to be considered for calculating the threshold limit.
2. All the transactions of the same nature will be considered for calculating the threshold limit for SFT income tax. E.g., suppose a person has purchased shares of ₹2 lakhs in September and of ₹3 lakhs in October in a financial year, and the value of shares for both months will be taken to calculate the threshold limit.
3. If any account is maintained or a transaction takes place in the name of two persons like a joint account, the entire value will be attributed to all the persons separately. E.g., if A and B have a joint savings account of ₹3 lakhs and ₹7 lakhs, then ₹10 lakhs will be attributed to both these persons separately to check the threshold limit as per section 285BA of the IT Act.
What Are Forms to Be Used for SFT and the Procedure to Submit SFT?
The SFT in income tax can be submitted in either of the following forms –
• Form 61A (other reporting enterprises)
• Form 61B (prescribed reporting financial institution)
SFT must be submitted electronically. It needs to be digitally signed by the Director of Income Tax or the Joint Director of Income Tax. The SFT needs to be furnished in the computer-readable format by a postmaster general, registrar or inspector general. The procedure to submit the SFT in income tax is –
1. Register yourself on the e-filing portal. Now log in and go to my accounts section, then click manage.
2. Now generate a new ITDREIN.
3. Now select your form type and reporting entity category.
4. After selecting the new ITDREIN, you will get a confirmation email and SMS on your email id and phone number.
5. Now, the generated ITDREIN will appear under my accounts section.
6. Now, upload the required form by clicking on the e-file option.
7. Now enter your PAN details, form name, upload type, etc.
8. After entering all the details correctly, upload the file with the Digital Signature Certificate.
9. Now, you will receive a success message, confirmation email and SMS.
Also Read: Taxable Income - What Is Taxable Income & Learn How Tax Is Calculated on Income
Due Date of Furnishing SFT
As per the Income Tax Act, 1961, the SFT shall be submitted on or before 31st May of the financial year, immediately following the FY of the transaction, in the form 61A.
Form 61B must be submitted on or before 31st May of every calendar year by the prescribed reporting financial institutions.
What Is the Remedy Available If There Is a Defect in the SFT Submitted?
If the SFT filed is considered defective by the income-tax authority. It shall be sent back to the reporting entity or any person of such entity to rectify it within 30 days from the date of sending back.
The due date for the rectification of SFT can also be extended by the income tax authority at his discretion on an application made for this.
Suppose the SFT is not rectified within 30 days or another extended period. In that case, the statement will be considered invalid, and the penalties for non-furnishing of SFT shall come into effect.
Conclusion
The government needs to track the high-value transactions of the customers. For this purpose, the Government of India came out with the Statement of Financial Transactions to save the Indian economy from black money. The specified persons must submit the SFT to the income tax authority. The government has also announced the list of specified persons in different nature of transactions along with their threshold limit. We hope that this article has helped you to know SFT’s meaning in Income Tax.
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