All about statement of financial transaction SFT
Introduction: Income Tax has a mechanism to detect high value transaction and escapement of reporting of income in the ITR. It is important to understand reporting mechanism and discharge of tax liability by the taxpayers on such transactions. Besides the discharge of tax liability, the reporting entity must understand about SFT and ensure correct reporting of SFT.
Tax auditor also have responsibility to report in form 3CD about the compliance of SFT reporting by the reporting entity. In this article effort has been made to explain all about SFT for better compliance and tax discharge.
Importance for Income Tax Return filing: It is important to understand statement of financial transaction (SFT) furnished under section 285BA read with rule 114E by certain person which are reflected in form 26AS along with SFT Code. Before filing income tax return ( ITR) tax payer must take into account such financial transaction to ensure that these transaction has been taken in to account while discharging the tax liability other wise there may be chances of additional demand of tax by the tax department either at the time of processing of return or original assessment proceeding or reassessment u/s 147 of Income Tax Act.
Reporting of SFT in form 26AS along with code, nature of transaction , limits etc.
List of such high value transactions as reported by reporting persons are available in the form 26AS so that it must be known for verification by the taxpayers.
Transactions covered under SFT : such transaction could be categories in to following categories along with threshold limit in some cases, however in some of the cases there is no threshold limit at all, all these transactions are explained hereunder.
(A) List of SFT with threshold limit of transaction:
SFT- Cash Transactions
| SFT number | Particulars | Value of Transaction | Person liable to report / Reporting persons |
| SFT- 001: | Purchase of bank drafts or pay orders in cash | Rs. 10 lakh (Aggregate amount in a F.Y) | Banking company, co-operative bank |
| SFT- 002: | Purchase of pre-paid instruments in cash. | Rs. 10 lakh (Aggregate amount in a F.Y) | Banking company, co-operative bank |
| SFT- 003: 03A | Cash deposit in one or more current account of a person | Rs. 50 lakh (Aggregate amount in a F.Y) | Banking company, co-operative bank |
| SFT- 003: 03B | Cash withdrawal (including through bearer’s cheques in one or more current account of a person | Rs. 50 lakh (Aggregate amount in a F.Y) | Banking company, co-operative bank |
| SFT- 004: | Cash deposit in account other than current account | Rs. 10 lakh (Aggregate amount in a F.Y) | Banking company, co-operative bank or post master office |
| SFT- 013: | Cash payment for sale of goods and services not being a transaction specifically required to be reported otherwise. | Rs. 2 lakh (individual transaction) | Any person liable to audit u/s 44AB |
| SFT- 014: | Cash deposits during specified period (9th Nov to 30th Dec, 2016) | Rs. 2.5 lakh | Banking company, co-operative bank or post master office |
| SFT – related to Investments | |||
| SFT- 005: | One or more-time deposits (other than a time deposit made through renewal of another time deposit) of a person | Rs. 10 lakh | Banking company, co-operative bank or post master office or Nidhi or NBFC |
| SFT- 007: | Purchase of bonds or debentures (other than the amount received on account of renewal of the bond or debenture issued by that company) | Rs. 10 lakh | Company or institution issuing debentures or bonds |
| SFT- 008: | Purchase of shares(including share application money) | Rs. 10 lakh | Company issuing shares |
| SFT- 009: | Buy back of shares (other than the shares bought in the open market) | Rs. 10 lakh | Company listed in recognized stock exchange |
| SFT- 010: | Purchase of mutual fund units (other than the amount received on account of transfer from one scheme to another scheme of that Mutual Fund) | Rs. 10 lakh | A trustee of mutual fund or any authorized person |
| SFT- 012: | Purchase or sale of immovable property | Rs. 30 lakh (individual transaction) | Inspector general or registrar or sub registrar |
Foreign Currency Transactions:
| SFT- 011: | Purchase of foreign currency ( Expense in foreign currency through a debit or credit card or through issue of Travellers Cheque or Draft or any other instrument. | Rs. 10 lakh | Authorised person under FEMA act |
| SFT- 011: | Sale of foreign currency (Receipt from any person for sale of foreign currency including credit of such currency to foreign exchange card) | Rs. 10 lakh | Authorised person under FEMA act |
SFT –related to credit card
| SFT- 006: | Payment in cash for one or more credit cards issued to that person. | Rs. 1 lakh in cash | Bank or Co-op. Bank or any other company or institution issuing credit card |
| SFT- 006: | Payment in any mode (other than cash) for one or more credit cards issued to that person | Rs. 10 lakh in any other mode | Bank or Co-op. Bank or any other company or institution issuing credit card |
It is obligatory u/s 285BA to furnish Statement of SFT or reportable account by certain reporting persons on or before due date under rule 114E(5) which is 31st May of the immediately following F.Y.
Form for filing of SFT is 61A under rule 114E and this form must be verified in prescribed manner and after filing of form 61A such SFT shall be reflected in form 26AS.
(B) Reporting of SFT without any threshold limit:
New sub rule 5A to rule 114E has been inserted with effect from 12.03.2021 where under
For the purposes of pre-filling the return of income, a statement of financial transaction under sub-section (1) of section 285BA of the Act containing information relating to capital gains on transfer of listed securities or units of Mutual Funds, dividend income, and interest income
TABLE
| Sl. No. | Nature of transaction | Reporting person | ||||||||||||
| 1. | Capital Gains on transfer of securities listed on any recognised stock exchange in India |
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| 2. | Capital Gains on transfer of Units of Mutual Funds |
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| 3. | Dividend income (Final or Interim) | A Company | ||||||||||||
| 4. | Deemed Dividend as referred to under Section 2(22)(a) to (e) | A Company | ||||||||||||
| 5. | Interest income |
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Reporting in Tax Audit Report form 3CD:
| 42 | Whether the assessee is required to furnish statement in Form No.61 or Form No. 61A or Form No. 61B, If yes, please furnish | : | Yes | ||||||
| Income-tax Department Reporting Entity Identification Number | Type of Form | Due date for furnishing | Date of furnishing, if furnished | Whether the Form contains information about all details/ transactions which are required to be reported | If not, please furnish list of the details/transactions which are not reported | ||||
| Nil | Nil | Nil | Nil | Nil | Nil | ||||
FORM 61: Related to statement where payee does not have PAN and furnish in form 60
Form 61B: Not applicable after 31.12.2016
Form 61A is applicable at present for reporting of SFT.
Conclusion: In this article effort has been made to explain all about SFT for the taxpayer to ensure correct filing ITR, reporting person in form 61A and reporting by the Tax auditor in Tax audit report form 3CD for better compliance by all the stakeholders and hope this will helpful for the readers.
