Statement of Financial Transaction (SFT) – Filing Nil statement is mandatory or optional ?

Under Section 285BA of the Income Tax requires specified reporting persons to furnish statement of financial transaction. Rule 114E of the Income Tax Rules, 1962 specifies that the statement of financial transaction required to be furnished under sub-section (1) of section 285BA of the Act shall be furnished in Form No. 61A. SFT has to be filed onlinein Form No. 61A with digital signature on or before 31st of May, immediately following the financial year in which the transaction is registered or recorded.

Section 285BA (5) empower the tax authorities to issue a notice to a person who is required to furnish a statement as above and who has not filed the statement within prescribed time, requiring person to furnish the statement within a period not exceeding 30 days from the date of service of such notice and in such case, the person shall furnish the statement within the time as specified in the notice

 Question is raised by many taxpayers as to the Obligation to furnish statement of financial transaction or reportable account. If there is no transactions whether filing will still be required for nil statement?

 Let us check it out.

 section 285 reads as under:

285BA. (1) Any person, being—

(a) an assessee; or

(b) the prescribed person in the case of an office of Government; or

(c) a local authority or other public body or association; or

(d) the Registrar or Sub-Registrar appointed under section 6 of the Registration Act, 1908 (16 of 1908); or

(e) the registering authority empowered to register motor vehicles under Chapter IV of the Motor Vehicles Act, 1988 (59 of 1988) ; or

(f) the Post Master General as referred to in clause (j) of section 2 of the Indian Post Office Act, 1898 (6 of 1898) ; or

(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) ; or

(h) the recognised stock exchange referred to in clause (f) of section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956) ; or

(i) an officer of the Reserve Bank of India, constituted under section 3 of the Reserve Bank of India Act, 1934 (2 of 1934) ; or

(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,

who is responsible for registering, or, maintaining books of account or other document containing a record of any specified financial transaction or any reportable account as may be prescribed, under any law for the time being in force, shall furnish a statement in respect of such specified financial transaction or such reportable account which is registered or recorded or maintained by him and information relating to which is relevant and required for the purposes of this Act, to the income-tax authority or such other authority or agency as may be prescribed.

 Rules for section 285BA are prescribed in Rule 114E which reads as under:

 Furnishing of statement of financial transaction.

114E. (1) The statement of financial transaction required to be furnished under sub-section (1) of section 285BA of the Act shall be furnished in respect of a financial year in Form No. 61A and shall be verified in the manner indicated therein.

(2) The statement referred to in sub-rule (1) shall be furnished by every person mentioned in column (3) of the Table below in respect of all the transactions of the nature and value specified in the corresponding entry in column (2) of the said Table in accordance with the provisions of sub-rule (3), which are registered or recorded by him on or after the 1st day of April, 2016

 After reading section 285BA and Rule 114E, one can safely draw conclusion that the filing is needed if there is a reportable transactions. If there is no reportable transactions then the filing is not mandated by section 285BA.

 It may be noted that CBDT has issued press release Dated 26.05.2017 which clarify the position of law that the registration of reporting person (ITDREIN registration) is mandatory only when at least one of the Transaction Type is reportable.

A functionality “SFT Preliminary Response” has been provided on the e-Filing portal for the reporting persons to indicate that a specified transaction type is not reportable for the year. The purpose of SFT is to avoid the notices to the income tax assessee. If preliminary response of nil transactions is submitted, the subsequent notices enquring about SFT could be avoided.

In short, even of nil SFT is not Mandatory, it is advisable to submit ‘SFT Preliminary Response’.