Taxation in a country like ours with vast population is challenging due to enormity of transactions. Hence with an intent to regulate the business transactions to create some legal provisions and insist tax payers to report such transactions regardless of the tax consequences of such transactions. Hence this reporting will serve as a base or a trail from which the Revenue can go to the root cause of the matter and detect evasion or pilferage if any. It was with this intent Section 285BA of Income-tax Act, 1961(‘the Act’) was introduced vide Finance Act, 2003 applicable from Assessment Year 2004-05.
Basis this background let us discuss the gamut of rule 114E read with Section 285BA.
Provisions of the Act:
Section 285BA of the Act provides that every person responsible for registering or maintaining books of account or other document pertaining to any specified financial transaction or reportable account, to furnish a statement of Specified Financial Transaction(‘SFT’).
What is SFT?
Answer: SFT means regular business transaction besides investments and acceptance of loan or deposit.
Due date for filing statement of financial transactions?
Answer: The due date for filing statement of financial transaction is 31st May in the succeeding financial year. However, considering the COVID situation the due date for filing statement of financial transaction has been extended to 30 June 2021.
What are the reportable transactions under Statement of financial transactions?
Transaction reportable without any threshold:
| Sl.No. | Nature of Transaction | Reporting Person |
| 1. | Capital Gains on transfer of securities listed on any recognised stock exchange in India | Recognised Stock Exchange; Depository as defined in section 2(1)(e) of Depositories Act, 1996; Recognised Clearing Corporation; Registrar to an issue and share transfer agent registered under section 12(1) of the SEBI Act, 1992. |
| 2. | Capital Gains on transfer of Units of Mutual Funds | Recognised Stock Exchange; Depository as defined in section 2(1)(e) of Depositories Act, 1996; Recognised Clearing Corporation; Registrar to an issue and share transfer agent registered under section 12(1) of the SEBI Act, 1992. |
| 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 | A Banking Company or Co-operative bank; Post Master General; NBFC’s |
Transaction reportable above certain threshold:
| Sl.No. | Nature of Transaction | Threshold | Reporting Person |
| 1. | Cash payment for purchase of bank drafts or pay orders or banker’s cheque | If aggregate payment is Rs. 10 lakhs or more in a financial year | Bank or Co-Op Bank |
| 2. | Cash payment for purchase of pre-paid instruments issued by the RBI | If aggregate payment is Rs. 10 lakhs or more in a financial year | Bank or Co-Op Bank |
| 3. | Cash deposits in one or more current account of a person | If aggregate amount is Rs. 50 lakhs or more in a financial year | Bank or Co-Op Bank |
| 4. | Cash withdrawals (including through bearer’s cheque) from one or more current account of a person | If aggregate amount is Rs. 50 lakhs or more in a financial year | Bank or Co-Op Bank |
| 5. | Cash deposits in one or more accounts (other than current account and time deposit) of a person | If aggregate amount is Rs. 10 lakhs or more in a financial year | Bank or Co-Op Bank Post Master General |
| 6. | Receipt of cash payment for sale, by any person, of goods or services of any nature, not being a transaction, whose specific reporting is otherwise required | If amount is more than Rs. 2 lakhs | Any person liable for Tax Audit u/s 44AB |
| 7. | Payment in cash for one or more credit cards issued to that person | If aggregate payment is Rs. 1 lakh or more in a financial year | Bank or Co-op. Bank or any other company or institution issuing credit card |
| 8. | Payment in any mode (other than cash) for one or more credit cards issued to that person | If aggregate payment is Rs. 10 lakhs or more in a financial year | Bank or Co-op. Bank or any other company or institution issuing credit card |
| 9. | One or more-time deposits (other than a time deposit made through renewal of another time deposit) of a person | If aggregate payment is Rs. 10 lakhs or more in a financial year | Bank or Co-op. Bank or any other company or institution issuing credit card |
| 10. | Receipt from any person 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) | If aggregate amount is Rs. 10 lakhs or more in a financial year | A company or institution issuing bonds or debentures |
| 11. | Receipt from any person for acquiring shares (including share application money) issued by the company | If aggregate amount is Rs. 10 lakhs or more in a financial year | A company issuing shares |
| 12. | Buy back of shares from any person (other than the shares bought in the open market) | If aggregate amount is Rs. 10 lakhs or more in a financial year | A company listed on a recognized stock exchange purchasing its own securities |
| 13. | Receipt from any person 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) | If aggregate amount is Rs. 10 lakhs or more in a financial year | A trustee of a Mutual Fund or such other authorized person managing the affairs of Mutual Fund |
| 14. | Purchase or sale by any person of immovable property | If transaction value or valuation by Stamp Valuation Authority is Rs. 30 lakhs or more | Inspector-General or Registrar or Sub-Registrar under the Registration Act, 1908 |
| 15. | Receipt from any person for sale of foreign currency including credit of such currency to foreign exchange card | If aggregate amount is Rs. 10 lakhs or more in a financial year | Authorised Dealer, Money Changer, Offshore Banking Unit, any other person authorised to deal in foreign exchange or foreign securities |
| 16. | Expense in foreign currency through a debit or credit card or through issue of Travellers Cheque or Draft or any other instrument. | Aggregating to 10 lakh rupees or more in a financial year | Authorised Dealer, Money Changer, Offshore Banking Unit, any other person authorised to deal in foreign exchange or foreign securities |
What is the scenario of SFT applicability to General Tax Payers whose accounts are audited under Section 44AB?
Below is the scenario of applicability of SFT to general tax payers
| Sl.No. | Nature of Transaction | Applicability of SFT |
| 1. | Each sale bill is below Rs.2 lakhs and aggregate sale during the year to a party below Rs.2 lakhs. | Not Applicable |
| 2. | Each sale bill is below Rs.2 lakhs and aggregate sale during the year to a party above Rs.2 lakhs | Not Applicable |
| 3. | Any of the sale bill to a party above Rs.2 lakhs but all receipts from the party are by way of cash. | Applicable |
| 4. | Any of the sale bill to a party above Rs.2 lakhs but all receipts from the party are through banking channel like ECS / NEFT / RTGS / Account payee crossed cheque or draft | Not Applicable |
What is the requirement to file SFT reporting under Form No.61A?
Reply: The requirement to file statement of financial transaction arises as per law only when a taxpayer is engaged in any of those transactions stated in rule 114E. Where there is no specified financial transaction, the requirement to file Form No.61A would not arise
Is filing of preliminary response is mandatory?
Filing of a preliminary response on every taxpayer is mandated by the Income-tax department making the work burden on the taxpayers and professionals. However, if a taxpayer dares not to respond online for the preliminary response sought by the Department, there is no provision in law to penalize him.
What are the consequences of failure to file SFT reporting?
Reply: In case of non-filing of SFT reporting a penalty of Rs 500 per day of default from original due date till date mentioned in notice shall be levied and Rs 1000 per day beyond the due date specified in the notice.