Last date to file Statement of Financial Transactions is 31st May 2018

Financial Transactions

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Last date to file Statement of Financial Transactions is 31st May 2018

“Taxes grow without rain” -Old Jewish Proverb

Less than 3% of the populations are taxpayers in the country. Lesser number of taxpayers, vast unorganized sectors & existence of parallel economy has resulted in Tax to GDP ratio of around 12% which is very low as compared to various other countries.

Widening the tax base & keeping a check on black money circulation are the key priorities of the Government. To widen the tax-payers base, there are number of initiatives taken by the Income tax department which includes:

–         Inter-Linking the income department with various Government Agencies like GST, FEMA, etc

–         Quoting of PAN made mandatory in large number of cases.

–         Linking everything with Aadhar.

–         Extracting information on the basis of the posting on face-book & social media sites

–         Placing restrictions on cash transactions like prohibition on loans in cash acceptance/payment, Penalty On cash acceptance of more than Rs. 2 Lakh, Non eligibility of deduction u/s 80G for donation in cash,  etc

–         Widening the scope of Tax Deduction at Source (TDS) & Tax Collection at  Source (TCS)

–         Exchange of information with other countries

One more such tool used to extract the information is ‘Statement of Financial Transactions (SFT)’. To keep track of high value transactions, CBDT has widened the norms to report certain high value transactions on annual basis. Earlier requirement of filing Annual Information Return (AIR) is now totally replaced by SFT.

SFT is a statement which is to be filed by certain persons with whom specified transactions are routed. It is required to be filed by various persons including banks, financial institutions, property registrar, and companies. The scope of filing has been extended even to businessmen & professional liable to tax audit u/s 44AB. Salaried Taxpayer and individuals not in the business/profession are not at all required to file SFT.

More specifically, all the companies are now required to file SFT if it receives Rs. 10 Lakh or more towards share capital or as share application money. Companies are also required to report 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. Further every listed company is required to report 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.

Further, Banks are required to report (a) 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 (b) 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 (c) Payments made by any person of an amount aggregating to (i) one lakh rupees or more in cash; or (ii) ten lakh rupees 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 (d) 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 (e) 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.

More stringent reporting requirement is incorporated in the laws with regard to cash transactions. Every seller [who is required to get its books of accounts audited u/s 44AB of the Income Tax Act-1961] is now required to file an annual statement incorporating the details of all the purchasers making payment in cash of more than Rs. 2 Lakh.

The Rule of aggregation is not applicable for reckoning the said limit of Rs. 2 Lakh. CBDT vide its clarification dated 23/12/2016 has clarified that the reporting requirement under SFT is there on receipt of cash payment and no aggregation is required for SFT reporting. [“Per Transaction” used in the said CBDT circular is probably pertaining to the transaction of receipt of money].

Another question emerges as to whether the persons who are covered by presumptive taxation scheme u/s 44AD (& so required to get the books of accounts audited u/s 44AB) are required to file the SFT? Going by the provision of SFT as contained in section 285BA, it appears that the provision is applicable to the taxpayer covered directly by section 44AB and not those who enter in to 44AB audit provision by virtue of presumptive taxation scheme u/s 44AD, 44ADA or 44AE.

Often, a question is raised as to whether the SFT filing is mandatory if there are no reportable transactions. Technically, no SFT is required in such case. CBDT has issued a press release dated 26/05/2017 aptly clarifying that registration of reporting person is mandatory only when at least one of the Transaction Type is reportable & not otherwise.

A new simple functionality titled “SFT Preliminary Response” has been provided at the e-Filing portal for the reporting persons to indicate that a specified transaction type is not reportable for the year. It is advisable to file “SFT Preliminary Response” even if there is no reportable transaction.

The due date for filing the SFT for the year ended is 31.05.2018. SFT is to be filed in Form No. 61A & is in addition to the regular Income tax returns. SFT is required to be uploaded by logging at a new reporting portal www.report.insight.gov.in.

There is a penalty of Rs. 500 per day for delay & if the default continues even after receipt of notice, penalty leviable shall be Rs. 1,000/- per day would be there [Section 271FA]. Filing of inaccurate information will attract penalty of Rs 50,000/- [Section 271FAA].

With SFT, department is able to get the information of various transactions which taxpayers otherwise may not have considered in his ITR. With the advanced usage of Information technology. Income tax department is all set to capture the 360 degree profile of the citizens.


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