All about Statement of Financial Transactions

Loading

All about Statement of Financial Transactions

There are various sources from which the department is collecting information of the transactions of the taxpayers. One such source of regular information is through SFT. This information is then uploaded by the department in the Annual Information Statement as referred to in section 258BB (which is a replacement of Form No. 26AS) of the taxpayers.

Statement of Financial Translations (SFT) refers to information related to certain high-value transactions which specified persons are required to report to the income tax department u/s 285BA of the Income Tax Act-1961. SFT was earlier known as ‘Annual Information Return (AIR)’ which is later substituted by the AIR.

Purpose of SFT or AIR was to curb black money, widen the tax base through collection of High Value Information of income, expenditure, investment and transactions.

Section 285BA of the Income Tax requires

  1. specified reporting persons
  2. to furnish statement of financial transaction.

Rule 114E of the Income Tax Rules, 1962 specifies that the statement of financial transaction is furnished in Form No. 61A. It is mandatory that specified reporting entity/person shall furnish a statement of financial transaction or reportable account as per Section 285BA of the Income Tax Act,1961.

In order to furnish statement of financial transactions, specified forms are required to be submitted as per Rule 114E of Income Tax Rules, 1962 referred to as “Statement of Financial Transaction (SFT).

Section 285BA was introduced by the Finance Act, 2003. Taxpayers may recall that ‘Annual Information Return (AIR)’ was introduced in 2003 with respect to specified financial transactions under Section 285BA wherein duty was casted on the government agencies and other authorities who are a valuable and reliable source of information, to report high-value transactions.

The concept was expanded by the Finance Act, 2014 which replaced Section 285BA as ‘Obligation to furnish statement of financial transaction or reportable account’ to widen the scope of specified persons and to introduce various other provisions.

Section 285BA of the Income Tax Act, 1961 lays down the obligation of certain specified persons who are required to submit information of those high value transactions registered or recorded by them during the financial year as specified in the rules. It further provides guidelines for the reporting person and reportable transactions for which the statements need to be submitted.

Statement of Financial Translations or SFT was introduced to provide a system to ensure the flow of information regarding the material financial transactions entered into by a taxpayer with other persons is automatic so that the same can be utilised for widening and deepening of the tax base. With a view to facilitate effective exchange of information in respect of residents and non-residents, section 285BA is amended so as to provide for furnishing of statements by a prescribed reporting financial institution in respect of a specified financial transaction or reportable account to the prescribed income-tax authority.

It may be noted that Section 285BA was further amended in 2019 by the Finance (No. 2) Act, 2019. The amendment was carried out in order to enable pre-filling of return of income, It was also intended to obtain information by widening the scope of furnishing of statement of financial transactions by mandating furnishing of statement by certain prescribed persons other than those who are currently furnishing the same. Earlier, there was a restriction on reporting of specified financial transactions where aggregate value does not exceed Rs. 50,000 in a financial year. This restriction has been removed by Finance (No. 2) Act, 2019.

Section 285BA of the Act reads as under:

Obligation to furnish statement of financial transaction or reportable account.

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; or

(l)  a person, other than those referred to in clauses (a) to (k), as may be prescribed,

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.

(2) The statement referred to in sub-section (1) shall be furnished for such period, within such time and in the form and manner, as may be prescribed.

(3) For the purposes of sub-section (1), “specified financial transaction” means any—

(a)  transaction of purchase, sale or exchange of goods or property or right or interest in a property; or

(b)  transaction for rendering any service; or

(c)  transaction under a works contract; or

(d)  transaction by way of an investment made or an expenditure incurred; or

(e)  transaction for taking or accepting any loan or deposit,

which may be prescribed :

Provided that the Board may prescribe different values for different transactions in respect of different persons having regard to the nature of such transaction.

(4) Where the prescribed income-tax authority considers that the statement furnished under sub-section (1) is defective, he may intimate the defect to the person who has furnished such statement and give him an opportunity of rectifying the defect within a period of thirty days from the date of such intimation or within such further period which, on an application made in this behalf, the said income-tax authority may, in his discretion, allow; and if the defect is not rectified within the said period of thirty days or, as the case may be, the further period so allowed, then, notwithstanding anything contained in any other provision of this Act, 86the provisions of this Act shall apply as if such person had furnished inaccurate information in the statement.

(5) Where a person who is required to furnish a statement under sub-section (1) has not furnished the same within the specified time, the prescribed income-tax authority may serve upon such person a notice requiring him to furnish such statement within a period not exceeding thirty days from the date of service of such notice and he shall furnish the statement within the time specified in the notice.

(6) If any person, having furnished a statement under sub-section (1), or in pursuance of a notice issued under sub-section (5), comes to know or discovers any inaccuracy in the information provided in the statement, he shall within a period of ten days inform the income-tax authority or other authority or agency referred to in sub-section (1), the inaccuracy in such statement and furnish the correct information in such manner as may be prescribed.

(7) The Central Government may, by rules made under this section, specify—

(a)  the persons referred to in sub-section (1) to be registered with the prescribed income-tax authority;

(b)  the nature of information and the manner in which such information shall be maintained by the persons referred to in clause (a); and

(c)  the due diligence to be carried out by the persons for the purpose of identification of any reportable account referred to in sub-section (1).

As empowered by section 285BA, CBDT vide its Notification No. 95/2015 dated 30.12.2015 amended Rule 114E detailing the reportable persons and transactions in respect of which they are required to furnish statement of financial transaction and was made effective prospective from 1st April, 2016. The statement of financial transaction shall be filed in Form 61A electronically on the e-filing portal of the Income Tax Department. With effect from 9th April 2018, registration, statement upload and all other facilities for Form No. 61A has been migrated from e-filing portal to the “Reporting Portal” (https://report.insight.gov.in).

Rule 114E (as amended) of Income Tax Rules, 1962 reads as follows-

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, namely:—

TABLE

Sl. No. Nature and value of transaction Class of person (reporting person)
(1) (2) (3)
1. (a) Payment made in cash for purchase of bank drafts or pay orders or banker’s cheque of an amount aggregating to ten lakh rupees or more in a financial year.

 

(b) Payments made in cash aggregating to ten lakh rupees or more during the financial year for purchase of pre-paid instruments issued by Reserve Bank of India under section 18 of the Payment and Settlement Systems Act, 2007 (51 of 2007).

 

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

A banking company or a co-operative 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).
2. Cash deposits aggregating to ten lakh rupees or more in a financial year, in one or more accounts (other than a current account and time deposit) of a person. (i) A banking company or a co-operative 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);

(ii) Post Master General10 as referred to in clause (j) of section 2 of the Indian Post Office Act, 1898 (6 of 1898).

3. One or more time deposits (other than a time deposit made through renewal of another time deposit) of a person aggregating to ten lakh rupees or more in a financial year of a person. (i) A banking company or a co-operative 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);

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

(iii) Nidhi referred to in section 406 of the Companies Act, 2013 (18 of 2013);

(iv) Non-banking financial company which holds a certificate of registration under section 45-IA of the Reserve Bank of India Act, 1934 (6 of 1934), to hold or accept deposit from public.

4. 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.

A banking company or a co-operative 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) or any other company or institution issuing credit card.
5. Receipt from any person of an amount aggregating to ten lakh rupees 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.
6. Receipt from any person of an amount aggregating to ten lakh rupees or more in a financial year for acquiring shares (including share application money) issued by the company. A company issuing shares.
7. Buy back of shares from any person (other than the shares bought in the open market) for an amount or value aggregating to ten lakh rupees 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 (18 of 2013).
8. Receipt from any person of an amount aggregating to ten lakh rupees 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 as may be duly authorised by the trustee in this behalf.
9. 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 ten lakh rupees or more during a financial year. Authorised person as referred to in clause (c) of section 2 of the Foreign Exchange Management Act, 1999 (42 of 1999).
10. Purchase or sale by any person of immovable property for an amount of thirty lakh rupees or more or valued by the stamp valuation authority referred to in section 50C of the Act at thirty lakh rupees or more. Inspector-General appointed under section 3 of the Registration Act, 1908 or Registrar or Sub-Registrar appointed under section 6 of that Act.
11. Receipt of cash payment exceeding two lakh rupees for sale, by any person, of goods or services of any nature (other than those specified at Sl. Nos. 1 to 10 of this rule, if any.) Any person who is liable for audit under section 44AB of the Act.
12. Cash deposits during the period 09th November, 2016 to 30th December, 2016 aggregating to—

 

(i) twelve lakh fifty thousand rupees or more, in one or more current account of a person; or
(ii) two lakh fifty thousand rupees or more, in one or more accounts (other than a current account) of a person.
 

(i) A banking company or a co-operative 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);
(ii) Post Master General as referred to in clause (j) of section 2 of the Indian Post Office Act, 1898 (6 of 1898).
13. Cash deposits during the period 1st of April, 2016 to 9th November, 2016 in respect of accounts that are reportable under Sl.No.12.  

(i) A banking company or a co-operative 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);
(ii) Post Master General as referred to in clause (j) of section 2 of the Indian Post Office Act, 1898 (6 of 1898).

(3) The reporting person mentioned in column (3) of the Table under sub-rule (2) (other than the persons at Sl.No.10 and Sl.No.11) shall, while aggregating the amounts for determining the threshold amount for reporting in respect of any person as specified in column (2) of the said Table,—

(a) take into account all the accounts of the same nature as specified in column (2) of the said Table maintained in respect of that person during the financial year;

(b) aggregate all the transactions of the same nature as specified in column (2) of the said Table recorded in respect of that person during the financial year;

(c) attribute the entire value of the transaction or the aggregated value of all the transactions to all the persons, in a case where the account is maintained or transaction is recorded in the name of more than one person;

(d) apply the threshold limit separately to deposits and withdrawals in respect of transaction specified in item (c) under column (2), against Sl. No. 1 of the said Table.

(4)(a) The return in Form No. 61A referred to in sub-rule (1) shall be furnished to the Director of Income-tax (Intelligence and Criminal Investigation) or the Joint Director of Income-tax (Intelligence and Criminal Investigation) through online transmission of electronic data to a server designated for this purpose under the digital signature of the person specified in sub-rule (7) and in accordance with the data structure specified in this regard by the Principal Director General of Income-tax (Systems):

Provided that in case of a reporting person, being a Post Master General or a Registrar or an Inspector General referred to in sub-rule (2), the said return in Form 61A may be furnished in a computer readable media, being a Compact Disc or Digital Video Disc (DVD), alongwith the verification in Form-V on paper.

Explanation.—For the purposes of this sub-rule, “digital signature” means a digital signature issued by any Certifying Authority authorised to issue such certificates by the Controller of Certifying Authorities.

(b) Principal Director General of Income-tax (Systems) shall specify the procedures, data structures and standards for ensuring secure capture and transmission of data, evolving and implementing appropriate security, archival and retrieval policies.

(c) The Board may designate an officer as Information Statement Administrator, not below the rank of a Joint Director of Income-tax for the purposes of day to day administration in relation to the furnishing of returns or statements.

(5) The statement of financial transactions referred to in sub-rule (1) shall be furnished on or before the 31st May, immediately following the financial year in which the transaction is registered or recorded:

Provided the statement of financial transaction in respect of the transactions listed at serial number (12) and serial number (13) in the Table under sub-rule (2), shall be furnished on or before the 31st day of January, 2017.

(6) (a) Every reporting person mentioned in column (3) of the Table under sub-rule (2) shall communicate to the Principal Director General of Income-tax (Systems) the name, designation, address and telephone number of the Designated Director and the Principal Officer and obtain a registration number.

(b) It shall be the duty of every person specified in column (3) of the Table under sub-rule (2), its Designated Director, Principal Officer and employees to observe the procedure and the manner of maintaining information as specified by its regulator and ensure compliance with the obligations imposed under section 285BA of the Act and rules 114B to 114D and this rule.

Explanation 1.—”Designated Director” means a person designated by the reporting person to ensure overall compliance with the obligations imposed under section 285BA of the Act and the rules 114B to 114D and this rule and includes—

(i) the Managing Director or a whole-time Director, as defined in the Companies Act, 2013 (18 of 2013), duly authorised by the Board of Directors if the reporting person is a company;

(ii) the managing partner if the reporting person is a partnership firm;

(iii) the proprietor if the reporting person is a proprietorship concern;

(iv) the managing trustee if the reporting person is a trust;

(v) a person or individual, as the case may be, who controls and manages the affairs of the reporting entity if the reporting person is, an unincorporated association or, a body of individuals or, any other person.

Explanation 2.—”Principal Officer” means an officer designated by the reporting person referred to in the Table in sub-rule (2).

Explanation 3.—”Regulator” means a person or an authority or a Government which is vested with the power to license, authorise, register, regulate or supervise the activity of the reporting person referred to in the Table in sub-rule (2).

(7) The statement of financial transaction referred to in sub-rule (1) shall be signed, verified and furnished by the Designated Director specified in sub-rule (6):

Provided that where the reporting person is a non-resident, the statement may be signed, verified and furnished by a person who holds a valid power of attorney from such Designated Director.

Who are required to report the specified financial transactions

Those persons who are required to report the specified financial transactions are called ‘specified persons’.

Section 285BA(1) prescribes the following persons as ‘specified  persons’ for the purpose of furnishing SFT:

An assessee i.e. who is liable to pay tax under the Income Tax Act

 

[The meaning of the word “assessee” should be taken from Section 2(7) of the Income Tax Act,1961 where it states that  “assessee” means a person by whom any tax or any other sum of money is payable under this Act, and includes—

(a) every person in respect of whom any proceeding under this Act has been taken for the assessment of his income or assessment of fringe benefits or of the income of any other person in respect of which he is assessable, or of the loss sustained by him or by such other person, or of the amount of refund due to him or to such other person ;

(b) every person who is deemed to be an assessee under any provision of this Act ;

(c) every person who is deemed to be an assessee in default under any provision of this Act.]

Government Office
A local authority or other public body or association
Registrars or Sub-Registrars 
Motor Vehicles registration authority
Post Office
Collector in case of Land acquisitions etc.
Recognised stock exchanges
Reserve Bank of India
A Depository
Any prescribed reportable financial Institution

The above persons are required to report the financial transactions which have been prescribed by the CBDT in Rule 114E. Till such transactions are prescribed, no such reporting is required under this section. For example, no rules have been prescribed for reporting of financial transactions by stock exchanges.

At present, Rule 114E prescribes the following ten types of persons as ‘reportable persons’ and hence they are in vogue since the nature of financial statements and reporting requirements have been prescribed for these persons only by the Board so far-

A Bank including a Co-operative Bank
Post Office/Post Master General
A Nidhi Company
Non- Banking Financial Companies (NBFCs)
Credit Card Issuing Companies
A Company
Mutual Funds
Authorised person under Foreign Exchange Management Act, 1999
Registrar or Sub-Registrar
Any person who is liable for audit under section 44AB of the Act.

A Reporting Entity or a Reporting Person is an entity which is required to furnish a Statement of Financial Transaction (in Form 61 A) or Statement of Reportable Account (in Form 61B) with the Income Tax Department as per the provisions of section 285BA of the Income Tax Act 1961.

SPecified financial transactions which requires reporting are as under:

As per Section 285BA(3), “specified financial transaction” means any—

(a) transaction of purchase, sale or exchange of goods or property or right or interest in a property; or

(b) transaction for rendering any service; or

(c) transaction under a works contract; or

(d) transaction by way of an investment made or an expenditure incurred; or

(e) transaction for taking or accepting any loan or deposit, which may be prescribed by the Board in this regard.

The Board is empowered to prescribe different values for different transactions in respect of different persons having regard to the nature of such transaction.

Under Rule 114E, reporting persons are required to report the following 13 types of financial transactions in the SFT to the authority. Out of these 13 nature of transactions, the last two are exclusively related to the demonetization period and hence irrelevant now.

Sl. No. Nature and value of transaction
1. (a) 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.

 

(b) 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 under section 18 of the Payment and Settlement Systems Act, 2007 (51 of 2007).

 

(c) 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.

2. 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.
3. 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.
4. Payments made by any person of an amount aggregating to—

 

(i) Rs. 1 Lakh  or more in cash; or

 

(ii) 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.

5. 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).
6. 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.
7. 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.
8. 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).
9. 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.
10. Purchase or sale by any person of immovable property for an amount of Rs. 30 Lakh  or more or valued by the stamp valuation authority referred to in section 50C of the Act at Rs. 30 Lakh or more.
11. 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 10 of this rule, if any.)
12. Cash deposits during the period 09th 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.
13. Cash deposits during the period 1st of April, 2016 to 9th November, 2016 in respect of accounts that are reportable under Sl.No.12.

Which reporting persons are required to furnish which financial transactions in the SFT

Under Rule 114E, the following reporting persons are required to report the prescribed financial statements in the statement of financial transactions or SFT-

Reporting Person Nature and Value of financial transactions
A Bank including a Co-operative Bank (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.

 

(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 under section 18 of the Payment and Settlement Systems Act, 2007 (51 of 2007).

 

(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.

 

(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.

 

(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.

 

(6) Payments made by any person of an amount aggregating to—

 

(i) Rs. 1 Lakh  or more in cash; or

 

(ii) 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.

Post Office/Post Master General (1) 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.

 

(2) 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.

Nidhi Company and Non- Banking Financial Companies (NBFCs) 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.

 

The following transactions may also apply to an NBFC:

 

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).

 

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. 

 

[It applies for allotment of shares (equity/preference) but does not cover transfer of shares.]

 

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. 

 

[This is applicable for a company listed on a stock exchange. It does not cover unlisted companies.]

 

The following shall apply if the company is liable for Compulsory tax audit u/s 44AB:

 

Receipt of cash payment exceeding Rs. 2 Lakh  for sale, by any person, of goods or services of any nature

Company (1) 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).

 

(2) 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. 

 

[It applies for allotment of shares (equity/preference) but does not cover transfer of shares.]

 

(3) 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. 

 

[This is applicable for a company listed on a stock exchange. It does not cover unlisted companies.]

 

(4) Receipt of cash payment exceeding Rs. 2 Lakh  for sale, by any person, of goods or services of any nature.

 

The following shall apply if the company is liable for Compulsory tax audit u/s 44AB:

 

Receipt of cash payment exceeding Rs. 2 Lakh  for sale, by any person, of goods or services of any nature

Mutual Funds 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).
Authorised person under Foreign Exchange Management Act, 1999 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.
Registrar or Sub-Registrar Purchase or sale by any person of immovable property for an amount of Rs. 30 Lakh  or more or valued by the stamp valuation authority referred to in section 50C of the Act at Rs. 30 Lakh or more.
Any person who is liable for audit under section 44AB (Like Individuals, HUF, firms, etc.) Receipt of cash payment exceeding Rs. 2 Lakh  for sale, by any person, of goods or services of any nature 

A class of reporting persons may also be required to report financial transactions categorized for other class of persons in the above table since the above table is prepared based on Rule 114E. This implies that if an NBFC is listed on a recognised stock exchange and buy-back its own shares from any person for Rs. 10 Lakh or more in a financial year in aggregate then also such an NBFC has to report the transaction in the SFT. This is applicable to listed Banks also.

Similarly, a company liable to tax audit u/s 44AB of the Income Tax Act, 1961  if receives more than Rs. 2 Lakh per transaction then such a company is also required to report such a transaction in the SFT.

In case of the specified buy-back of shares transactions, all ESOP related transactions would come under the reporting requirement ambit.

Buy-back of shares applies only to a listed company. Unlisted companies are outside the purview of any reporting requirement.

The term ‘recognised stock exchange’ is not defined either in section 285BA or in Rule 114E. However, according to Explanation 1(ii) to Section 43(5), “recognised stock exchange” means a recognised stock exchange as referred to in clause (f) of section 2 of the Securities Contracts (Regulation) Act, 1956 and which fulfils such conditions as may be prescribed and notified by the Central Government for this purpose.

The conditions have been prescribed in Rule 6DDA of the Income Tax Rules, 1962.

The following 6 stock exchanges have been so far notified as recognized stock exchanges in this regard:

Name of the Stock Exchanges Notified Vide
Bombay Stock Exchange Limited (BSE) Notification No. 2/2006 dated 25-01-2006 
The National Stock Exchange of India Ltd. (NSE) Notification No. 2/2006 dated 25-01-2006 
MCX Stock Exchange Ltd. Notification No. 46/2009, dated 22-5-2009
United Stock Exchange of India Limited Notification No. 12/2011, dated 25-2-2011
India International Exchange (IFSC) limited, Gandhinagar, Gujarat

(PAN: AAGCB8819B)

Notification No. 35/2018, dated 31-7-2018 
NSC IFSC Limited Gandhinagar, Gujarat (PAN: AAFCN4161P) Notification No. 36/2018, dated 31-7-2018

In respect of reporting of receipt of cash of more than Rs. 2 Lakh for sale of goods or service by any person who is liable for audit under section 44AB of the Income-Tax Act, 1961 at serial no. 11 of Rule 114E(2), doubts were raised if such transactions are required to be aggregated for reporting.

It has been clarified that the said transactions did not require aggregation and the reporting requirement under SFT for this purpose is on receipt of cash payment exceeding Rs. 2 Lakh for sale of goods or services per transaction. Hence, the reporting requirement in this case gets triggered on a ‘per transaction’ basis and not on an aggregate basis.

Aggregation Rule

Taxpayers need to know about the aggregation rule as it needs to be applied for specified transaction types to identify transactions/persons/accounts which are reportable. Rule 114E(3) specifies that the reporting person shall, while aggregating the amounts for determining the threshold amount for reporting in respect of any person –

(a) Take into account all the accounts of the same nature maintained in respect of that person during the financial year;

(b) Aggregate all the transactions of the same nature recorded in respect of that person during the financial year;

(c) Attribute the entire value of the transaction or the aggregated value of all the transactions to all the persons, in a case where the account is maintained or transaction is recorded in the name of more than one person;

The aggregation rule is applicable for all transaction types except SFT- 012 (Purchase or sale of immovable property) and SFT- 013 (Cash payment for goods and services).

Prescribed Form for filing Statement of Financial Translations (SFT)

Rule 114E(1) prescribes a statement of financial transaction  in Form No. 61A. The Form No. 61A has been divided into four parts–

  1. Part A contains statement level information is common to all transaction types. The other three parts relate to report level information which has to be reported in one of the following parts (depending on the transaction type).
  2. Part B (Person Based Reporting)
  3. Part C (Account Based Reporting)
  4. Part D (Immovable Property Transaction Reporting)

The applicability of the reporting format is discussed in the following paragraphs. The same is enumerated as under:

  1. Person Based Reporting (Part B):
    Part B shall be used for person based reporting which is relevant to following transactions:

SFT- 001: Purchase of bank drafts or pay orders in cash

SFT- 002: Purchase of pre-paid instruments in cash

SFT- 005: Time deposit

SFT- 006: Payment for credit card

SFT- 007: Purchase of debentures

SFT- 008: Purchase of shares

SFT- 009: Buy back of shares

SFT- 010: Purchase of mutual fund units

SFT- 011: Purchase of foreign currency

SFT- 013: Cash payment for goods and services

For determining reportable persons and transactions, the reporting person/entity is required to aggregate all the transactions of the same nature recorded in respect of the person during the financial year (refer to the applicability of aggregation rule). In a case, where the transaction is recorded in the name of more than one person, the reporting person/entity should attribute the entire value of the transaction or the aggregated value of all the transactions to all the persons.

The reporting person/entity is required to submit details of persons and transactions which are determined as reportable. The reporting format also enables reporting person/entity to furnish information relating to each individual product within a product type. E.g: if a person has multiple credit cards and the aggregate value of the transactions in all credit cards exceeds the threshold value, the aggregate transaction value will be reported in section B3 of form 61 A and the transactions pertaining to individual credit cards can be reported in section B4 of form 61 A.

  1. Account Based Reporting (Part C):
    Part C shall be used for account based reporting which is relevant to following transactions:

SFT- 003: Cash deposit in current account

SFT- 004: Cash deposit in account other than current account

SFT- 014: Cash deposits during specified period (9th Nov to 30th Dec, 2016).

For determining reportable persons and accounts, the reporting person/entity is required to take into account all the accounts of the same nature maintained in respect of that person during the financial year and aggregate all the transactions of the same nature recorded in respect of the person during the financial year (refer to the applicability of aggregation rule). In a case where the account is maintained in the name of more than one person, the reporting person/entity should attribute the entire value of the transaction or the aggregated value of all the transactions to all the persons. In case of SFT- 003 (Cash deposit or withdrawals in current account), the threshold limit has to be applied separately to deposits and withdrawals in respect of transactions. After identification of reportable persons and accounts, the reporting person/entity is required to submit details of accounts which are determined as reportable. Part C3 of the form 61 A has details of the accounts that need to be reported along with the aggregate transaction values. Aggregation of transaction has the same definition as explained in person based accounting.

  1. Immovable Property Transaction Reporting (Part D):
    Part D is  be used for reporting of purchase or sale of immovable property (SFT- 012). The reportable immovable property transactions have to be determined by applying the threshold limit. The reporting person/entity is required to submit specified details of immovable property transactions which are determined as reportable.

Download Copy of Form 61A in pdf format to know the detailed information required to be filed.

The following transaction types are required to be reported in the Statement of Financial Transactions (SFT)-

SFT- 001 Purchase of bank drafts or pay orders in cash
SFT- 002 Purchase of pre-paid instruments in cash
SFT- 003 Cash deposit in current account
SFT- 004 Cash deposit in account other than current account
SFT- 005 Time deposit
SFT- 006 Payment for credit card
SFT- 007 Purchase of debentures
SFT- 008 Purchase of shares
SFT- 009 Buy back of shares
SFT- 010 Purchase of mutual fund units
SFT- 011 Purchase of foreign currency
SFT- 012 Purchase or sale of immovable property
SFT- 013 Cash payment for goods and services
SFT- 014 Cash deposits during specified period (9th Nov to 30th Dec, 2016).

Obligations of a Reporting Person under section 285BA

To comply with reporting obligations, the Statement of Financial Transactions (SFT) needs to be filed by all Reporting Persons in the prescribed format and within the prescribed time limit. Section 285BA of the Income Tax requires specified reporting persons to furnish Statement of Financial Transactions (SFT).

Prescribed format of filing SFT: Rule 114E(1) of the Income Tax Rules, 1962 specifies that the Statement of Financial Transactions (SFT) is required to be furnished in Form No. 61A.

Prescribed time limit of filing SFT: Rule 114E(5) of the Income Tax Rules, 1962 specifies that the Statement of Financial Transactions (SFT) is required to be furnished on or before 31st May immediately following the financial year in which the transaction is registered or recorded.

Section 285BA(5) provides that if a reporting person does not furnish the SFT within the prescribed time limit, then the income-tax authority may serve upon a notice on such person requiring him to furnish such statement within a period of 30 days from the date of service of such notice. In such a case, the reporting person shall furnish the statement within the time limit specified in the notice.

Extension of time limit granted for AY 2020-21: Due to COVID-19 pandemic, the Government vide Ordinance issued on 31-03-2020 has extended the due date of filing of Statement of Financial Transactions (SFT) in Form 61A to 30-06-2020. Hence, the SFT for FY 2019-20 can be furnished by the extended due date of 30.06.2020 without any penal consequences.

Online or e-filing of SFT: The Statement of Financial Transactions (SFT) in Form No. 61A shall be required to be furnished electronically on the designated portal (https://report.insight.gov.in/). It is mandatory to furnish the SFT with digital signature only for all the reporting persons except Post Master General and Registrar/IG who can furnish the statement in CD/DVD format with Form-V on paper. [Rule 114E(4)]

SFT is required to be verified and signed by the following persons-

Reporting person Who can sign
Company Managing Director or a Whole Time Director
Partnership firm Managing Partner
Proprietorship Concern Proprietor
Trust Managing Trustee
AOP/BOI/etc. Person or individual who controls the affairs

Rectification or correction of the information:
Where a reporting person after furnishing a statement or SFT under section 285BA(1) or in pursuance of a notice issued under section 285BA(5), comes to know or discovers any inaccuracy in the information provided in the statement, shall within a period of 10 days rectify the inaccuracy in such statement and furnish the correct information. [Section 285BA(6)]

Defective statements:

 Where a reporting person has furnished a statement or SFT in Form No. 61A is found to be defective then the prescribed income-tax authority shall intimate the defects and shall grant him a period of 30 days for rectification of the defects. The period of 30 days may be extended by the authority on an application made by the reporting person.

If the reporting person does not rectify the defect within the period of 30 days or the extended period, then it shall be deemed that no such statement is filed by the reporting person and all the penal consequences will follow. [Section 285BA(4)]

Penalty for failure to furnish statement of financial transaction or reportable account: If a reporting person fails to furnish the required Statement of Financial Transactions (SFT) in Form 61A u/s 285BA(1) within the prescribed time limit then, according to section 271FA,  the income tax authority can impose a penalty of Rs 500 for every day during which such failure continues.

In case, the reporting person fails to furnish the required Statement of Financial Transactions (SFT) in Form 61A u/s 285BA(5) within the time limit specified in the notice then the penalty is Rs 1,000 for every day during which such failure continues, to be reckoned from the day immediately following the day on which the time specified in such notice for furnishing the statement expires.

In view of the stringent penalty laid down in Section 271FA, one needs to be cautious and carefully analyse the different transactions for the applicability of reporting.

However, Section 273B provides that no such penalty shall be levied if the reporting person proves that there was reasonable cause for the said failure.

Penalty for furnishing inaccurate statement of financial transaction or reportable account:

There is a penalty for inaccurate information furnishing. Where a reporting person furnishes SFT in Form 61A but furnishes inaccurate information in the SFT and where,

(a) the inaccuracy is due to a failure to comply with the due diligence requirement prescribed under section 285BA(7) or is deliberate on the part of the person; or

(b) the person knows of the inaccuracy at the time of furnishing the statement of financial transaction or reportable account, but does not inform the prescribed income-tax authority; or

  1. c) does not rectify the inaccurate information u/s 285BA(6),

then, the prescribed income-tax authority may direct that such person shall pay a penalty of Rs. 50,000.

As per amendment in section 271FAA by the Finance (No. 2) Act, 2019, the penalty provisions contained in section 271FAA so as to ensure correct furnishing of information in the SFT has been widened to cover all the reporting entities under section 285BA.

Section 271FA deals with a situation where the reporting person does not furnish the required SFT with the income tax authority within the due date whereas section 271FAA deals with a situation where the reportable person furnishes the SFT but with inaccurate or wrong information.

In case of penalty under section 271FAA, the same will be levied even if there was reasonable cause for the said failure. It is because no such immunity from section 271FAA is prescribed in section 273B.

Whether filing Nil statement of financial transaction (SFT) is mandatory?

 Section 285BA of the Income Tax mandates specified reporting persons to furnish a statement of financial transaction. Rule 114E of the Income Tax Rules, 1962 specifies that the statement of financial transaction (SFT) is required to be furnished in Form 61A. It is mandatory to furnish the statement of financial transaction or SFT in Form 61A online under the digital signature of the prescribed persons on or before 31st May immediately following the financial year in which the transaction is registered or recorded.

Section 285BA(5) empowers the income-tax authorities to issue a notice to a reporting person who is required to furnish a statement of financial transaction and who has not filed the statement within the prescribed time limit and require the reporting 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 is required to furnish the statement within the specified time as per the notice. The CBDT in a press release dated 26-05-2015 has clarified that in case there are reportable transactions for the year, the reporting person/entity is required to register with the Income Tax Department and generate Income Tax Department Reporting Entity Identification Number (ITDREIN).  The registration of the reporting person (ITDREIN registration) is mandatory only when at least one of the Transaction Type is reportable.  In short, from the clarification, it follows that furnishing the SFT is mandatory only when there are reportable transactions.

In such cases, CBDT has envisaged a simple mechanism to report that a person is not required to report any such transactions in order to track the status efficiently. 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. In short, one can say that it is not mandatory to furnish a NIL SFT. Still, it is advisable to submit the SFT Preliminary to avoid the notices and compliances.

Menu