Overview on Statement of Financial Transactions (SFT)

OVERVIEW ON STATEMENT OF FINANCIAL TRANSACTIONS (SFT)

• SFT Considering Recent CBDT Notification No. 16/2021, dated 12-03-2021 along with the penalty provisions under the income tax act
• Statement of financial transactions provides a reporting system wherein specified entities are required to provide information about material financial transactions to the Tax Authority.
• While Presenting Union Budget 2021, Govt of India to make the simple filing of ITR, details of interest from banks, post office, dividend income, and capital gains from listed securities, etc. earned by the person in the FY will be pre-filled in his Income-tax Return.

ALL THE TRANSACTIONS WHICH IS LIABLE TO BE REPORTED IN STATEMENT OF FINANCIAL TRANSACTIONS

All the Transactions liable to be reported in the statement of financial transactions can now be classified into 2 Type:

• Needed to Reporting of transactions above threshold limit as specified
• Needed to Reporting of Transactions without any threshold limit as specified

Needed to Be Reporting above the threshold limit as specified

Below ‘SFT’ are needed to be reported if the value of the transaction cross the threshold limit, & it is registered or recorded by the specified person:

Sl. No.	Particular and Nature of transaction	What is the Value of Transaction	Who is the Reporting Entity
Foreign Currency Transactions
1	Expense in foreign currency via debit or credit card or Via issue of Travellers Cheque or Draft or any other instrument.	IF Total INR 10,00,000/- or more in a FY.
2	Receipt from any person for sale of foreign currency including credit of such currency to foreign exchange card	IF Total INR 10,00,000/-or more in a FY.	♦ Authorized Dealer ♦ Money Changer ♦ Offshore Banking Unit ♦ Any other person authorized to deal in foreign exchange or foreign securities
Investments
3	Purchase or sale by any person of immovable property	IF Total INR 10,00,000/-or more in an FY.	Inspector-General or Registrar or Sub-Registrar under the Registration Act, 1908
4	Receipt from any person for acquiring shares (including share application money) issued by the company	IF Total INR 10,00,000/-or more in an FY.	A company issuing shares
5	One or more time deposits (other than a time deposit made through renewal of another time deposit) of a person	IF Total INR 10,00,000/-or more in an FY.	♦ Bank or Co-op. bank ♦ Post-Master General ♦ Nidhi Companies ♦ NBFCs
6	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 Total INR 10,00,000/-or more in a FY.	A trustee of a Mutual Fund or such other authorized person managing the affairs of Mutual Fund
7	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 Total INR 10,00,000/-or more in a FY.	A company or institution issuing bonds or debentures
8	Buyback of shares from any person (other than the shares bought in the open market)	IF Total INR 10,00,000/-or more in a FY.	A company listed on a recognized stock exchange purchasing its own securities
Cash Transactions
9	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	In case the Amount is more than Rs. 2 lakhs	Any person who is liable for tax audit under Section 44AB
10	Cash payment for the purchase of pre-paid instruments issued by the RBI	IF Total INR 10,00,000/-or more in an FY.	Bank or Co-op. Bank
11	Cash deposits in one or more accounts (other than a current account and time deposit) of a person	IF Total INR 10,00,000/-or more in a FY.	♦ Bank or Co-op. Bank ♦ Post-Master General
12	Cash payment for the purchase of bank drafts or pay orders or banker’s cheque.	IF Total INR 10,00,000/-or more in a FY.	Bank or Co-op. Bank
13	Cash withdrawals (including through bearer’s cheque) from one or more current account of a person	IF Total INR 50,00,000/-or more in a FY.	Bank or Co-op. Bank
14	Cash deposits in one or more current account of a person	IF Total INR 50,00,000/-or more in a FY.	Bank or Co-op. Bank

Needed to Be Reporting without any threshold limit as specified

Below ‘SFT’ are required to be reported by the specified person “Company/Reporting Entity”. No threshold limit is prescribed for the Below transactions.

Sl. No.	Particular and Nature of transaction	Who is Reporting entity
1	Interest income	♦ A Banking company or a Co-op. Bank; ♦ Post-Master General; ♦ NBFCs
2	Deemed Dividend U/s 2(22)(a) to (e)	A Company
3	Capital Gains on the transfer of Units of Mutual Funds	♦ Recognized Stock Exchange; ♦ Depository as defined in section 2(1)(e) of Depositories Act, 1996; ♦ Recognized Clearing Corporation; ♦ Registrar to an issue and share transfer agent registered under section 12(1) of the SEBI Act, 1992.
4	Capital Gains on the transfer of securities listed on any recognized stock exchange in India	♦ Recognized Stock Exchange; ♦ Depository as defined in section 2(1)(e) of Depositories Act, 1996; ♦ Recognized Clearing Corporation; ♦ Registrar to an issue and share transfer agent registered under section 12(1) of the SEBI Act, 1992.
5	Final or Interim Dividend income	A Company

Quoting of Permanent account number:

• Permanent account number is Compulsory only if Amount exceeds INR 2,00,000/- per transaction.
• if the Person bill purchaser has purchased the goods at various occasions & at each occasion bill amount is not exceeding INR 2,00,000/- even then a Permanent account number would not be required.

REPORTING IN STATEMENT OF FINANCIAL TRANSACTIONS:

• Reporting in the statement of financial transactions would be required only if the payment exceeding Rs. 2 Lakh is received in cash in a day.
• It is further validated by CBDT vide Explanation on it that Reporting requirement under statement of financial transactions is there on receipt of cash payment & No aggregation is required for a statement of financial transactions reporting. “Per Transaction” used in the said CBDT circular is probably pertaining to the transaction of receipt of money.

IS FILING OF NIL STATEMENT OF FINANCIAL TRANSACTIONS IS COMPULSORY:

1. In case there is no reportable transaction, No statement of financial transactions (i.e., Form No. 61A) is required to be filed. Tax Dept Reporting Entity Identification Number (ITDREIN) is compulsory only if there are any reportable transactions. No Tax Dept Reporting Entity Identification Number is needed if there is no transaction.
2. A new simple functionality titled “statement of financial transactions Preliminary Response” has been provided at the e-Filing portal for the reporting persons to indicate that a prescribed Transaction type is not reportable for the FY.
3. It is advisable to file a “statement of financial transactions Preliminary Response” even if there is no reportable transaction.
4. CBDT has issued a press release dated 26/05/2017 aptly clarifying that registration of reporting person (ITDREIN registration) is Compulsory only when at least one of the Transaction Type is reportable & not otherwise.

PARTS OF FORM 61A

 

SFT Filling Date Due Date:

The statement of financial transactions shall electronically be submitted in relation to an FY by reporting entity with a DSC of the person responsible for verifying the declaration in Form No. 61A. The statement of financial transactions shall be submitted instantly after FY in which the transaction is registered or registered, on or before 31 May.

Failure to furnish SFT

In case of non-furnishing of the statement of financial transactions within due date, Total, a penalty of Rs 500/- per day from the expiry of original due date till the due date mentioned in the notice and Rs 1,000 per day beyond the due date specified in the notice. (Reference from Section 271FA of the Act)

The penalty of Rs 50,000 will be levied on prescribed reporting financial institution if it provides inaccurate information in the statement where:

• the person discovers the inaccuracy after the statement of financial transaction or reportable account is furnished and fails to inform and furnish correct information within 10 days. Or
• the person knows of the inaccuracy at the time of furnishing the statement of financial transaction or reportable account, but does not inform the specified Tax authority or any other authority or agency; or
• inaccuracy is due to a failure to comply with specified due diligence needed or is deliberate on the part of that person; or
• { As per provision of section 271FAA of Income Tax Act,}

Conclusion:

• There is a notable difference between the two provisions as discussed above. Section 269ST applies to transactions of receipt of money of Two Lakh rupees or more, whereas reporting of SFT, as implemented by Rule 114E, applies to the receipt of cash payment exceeding Two Lakh rupees.
• Thus, the sales transactions involving receipt of cash of exactly Rs. Two lakhs will go unreported in Form 61A under Rule 114E, which are, in fact, liable to be booked under S. 269ST, read with section 271DA of the Act.

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