SFT (Statement of Financial Transaction) is a report of financial transactions by specified people. These specified people register, maintain or record of the financial transaction to submit SFT to the income tax department or any other concerned agency.
The black money accumulation is always a threat to any well-functioning economy. Hence, the government of India along with the ministry of finance has formulated policies to curb black money along with widening the tax base and has taken many measures to achieve this. One such initiative was to cast an obligation on government agencies and other authorities who are a valuable and reliable source of information, to report high-value transactions. Such specified people are obligated to submit the ‘Annual Information Return (AIR)’ that was introduced in 2003 with respect to specified financial transactions, as mentioned under Section 285BA.
Later, Finance Act 2014 replaced Section 285BA and was renamed “obligation to furnish statement of financial transaction or reportable account” to widen the scope of specified people by introducing various other provisions.
What is Section 285BA?
Section 285BA of the Income-tax Act requires the following specified people to provide a statement of specified financial transaction that is being registered, recorded or maintained by them:
The specified person who belongs to an office of Government.
A local authority or other public body or association.
The Registrar or Sub-Registrar appointed under section 6 of the Registration Act, 1908.
The registering authority, who is authorized to register motor vehicles under Chapter IV of the Motor Vehicles Act, 1988.
The Post Master General as referred to in clause (j) of section 2 of the Indian Post Office Act, 1898.
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.
The recognized stock exchange referred to in clause (f) of section 2 of the Securities Contracts (Regulation) Act, 1956.
An officer of the Reserve Bank of India constituted under section 3 of the Reserve Bank of India Act.
A depository referred to in clause (e) of sub-section (1) of section 2 of the Depositories Act, 1996.
A Prescribed reporting financial institution.
People obligated to file a SFT (Statement of Financial Transactions)
As per by Rule 114E, following are the people who are required to present a SFT (statements of financial transactions) that is registered, maintained and recorded by them during a financial year to the concerned agency.
Any person who is liable for audit under section 44AB of the Income Tax Act, 1961.
A Banking Company
A Co-operative Bank
Post-Master General of Post office
A Nidhi referred to in sec 406 of the Companies Act 2013.
A Non-banking Financial Company (NBFC)
Any Institution issuing Credit Card
A Company or Institution issuing bonds or debentures
A Company issuing shares
A company listed on a recognized stock exchange purchasing its own securities
A Trustee of a Mutual Fund or such other person authorized by the trustee
Authorized Dealer, Money Changer, Off-shore Banking Unit, or any other person defined in FEMA, 1999
Inspector-General or Sub-Registrar appointed under Registration Act, 1908
Procedure to Submit SFT:
SFT is either submitted in Form 61A or Form 61B. It can be submitted electronically, under digital signature certificate to the Director of Income-tax (Intelligence and Criminal Investigation) or the Joint Director of Income-tax (Intelligence and Criminal Investigation). A Post Master General or a Registrar or an Inspector General may furnish SFT in a computer readable media being a Compact Disc or Digital Video Disc (DVD), along with the verification in Form-V on paper. The following procedure is to be undertaken for furnishing a SFT:
If already registered on e-filing portal, log in and go to My Account>Manage ITDREIN (Income Tax Department Reporting Entity Identification Number).
Click on ‘Generate New ITDREIN’.
Select form type and Reporting entity category and click on ‘Generate ITDREIN’.
Based on the above selection, appropriate ITDREIN will be generated and a confirmation email and SMS will be sent respectively to registered email id and mobile number.
ITDREIN generated will now appear under My Account>Manage ITDREIN
Go to e-file>Upload Form ‘X’ (appropriate Form No appears based on the selection made during registration).
Then verify/enter PAN, Form Name, FY, Reporting entity category, Half year, upload type i.e., whether original/correction form /Nil statement.
On successful confirmation of above details, upload the file along with digital signature certificate
A successful completion message will appear on the screen on successful uploading and confirmation email and SMS will be sent to registered email id and mobile number respectively
Uploaded file may be either ‘accepted’ or ‘rejected’. In case of rejection, reason for rejection would be mentioned and correction form shall be submitted through above procedure.
Due Date of furnishing an SFT:
The statement of financial transactions can be filed online return via Form No. 61A with a digital signature before 31st May of the following the financial year in which the transaction is registered or recorded. Section 285BA (5) empowers 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 the prescribed time, requiring a 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. If the assessee still carries the default by not responding to the notice, he/she will be defaulted with a penalty of INR 500/- per day, of each passing day of default. The penalty will be computed from the expiry of the period stipulated in the notice.
Consequences of not furnishing SFT:
The inability to furnish reportable accounts will imply a penalty under section 271FA at the rate of Rs. 500/- for every day during which such failure continues. As per provisions of section 285BA (5), the prescribed Income-tax authorities shall issue a notice to defaulter, directing the specific person to file 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 specified in the notice. If such a person fails to file the statement within the specified time then a penalty of Rs.1,000/- for every day for which the failure continues, may be levied from the day immediately following the day on which the time specified in such notice for furnishing the statement expires.
Implications of furnishing inaccurate or defective SFT:
As per the section 271FAA of the Income-tax Act, if a person who is required to furnish statement of financial transaction presents an inaccurate information in the statement, and where:
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 that person;
the person knows of the inaccuracy at the time of furnishing the statement but does not inform the prescribed income-tax authority or such other authority or agency;
the person discovers the inaccuracy after the statement is furnished and fails to inform and furnish correct information within a period of 10 days as specified under section 285BA(6);
Then the prescribed income-tax authority may direct that such person shall pay, by way of penalty, a sum of Rs. 50,000/-
Revision in SFT in case of Inaccuracy:
In case if the SFT that is filed, considered to be defective by the concerned agency or authority, it shall be informed to the specified reporting entity/person by such authority and a chance for rectifying the defect within a period of 30 days from the date of such intimation shall be given. This due date for rectification of default can be further extended by income tax authority at it’s discretion on an application regarding this. However, if the defect is not rectified within 30 days or such extended period, the statement shall be treated as invalid and consequences of non-furnishing of SFT shall be applied thereafter.