The accumulation of black money poses a huge threat to the Indian economy. As a result, the Indian government has launched a number of steps to combat such actions. In 2003, the 'Annual Information Return (AIR)' was introduced under Section 285BA of the Income Tax Act. It was later repealed by the Finance Act of 2014, which renamed it 'duty to produce a statement of financial transaction or reportable account'.
Filers must provide a statement of financial transaction or reportable account for their defined financial transactions. The government has updated Form 26AS as of June 2020 to include specified transactions in the Statement of Financial Transactions (SFT).
If such transactions occur in your fiscal year, they will be shown in "Part E" of your new 26AS. As a result, taxpayers can file an SFT transaction in Form 26AS by completing Form 61A. It allows the IT department to keep track of transactions and prevent illicit activity.
Financial transactions specifically required to be reported under Section 285BA are as follows:
Section 285BA authorises the Central Board of Direct Taxes (CBDT) to prescribe different values with respect to different specified financial transactions in respect of different specified persons having regard to the nature of such transactions.
The same prescribed by CBDT via Rule 114E is given below:
|SI No||Nature of transaction to be reported||Monetary threshold of transaction||Specified person required to submit SFT|
|1||Cash payment purchase of bank drafts or pay orders or banker’s cheque, Cash payments for the purchase of pre-paid instruments issued by the Reserve Bank of India, Cash deposits in one or more current accounts of a person, Cash withdrawals from one or more current accounts of a person||Aggregating to Rs 10 lakh or more in an FY, Aggregating to Rs 10 lakh or more during the FY, Aggregating to Rs 50 lakh or more in an FY, Aggregating to Rs 50 lakh or more in an FY||A banking company or co-operative bank to which the banking regulation applies|
|2||Cash deposits in one or more accounts other than a current account and time deposit of a person||Aggregating to Rs 10 lakh or more in an FY||A banking company or co-operative bank to which the banking regulation applies, Post-Master General of a post office|
|3||One or more time deposits (other than renewed time deposit of another time deposit) of a person||Aggregating to Rs 10 lakh or more in an FY||A banking company or co-operative bank to which the banking regulation applies, Post-Master General of a post office, Nidhi Company as per Section 406 of the Companies Act, 2013 NBFC – Non-banking financial company holding a certificate of registration under RBI Act to hold or accept deposit from public|
|4||Credit card payments made by any person either in cash or by any other mode in a FY.||Aggregating to Rs 1 lakh or more in cash or Rs 10 lakh or more by any other mode in an FY||A banking company or Co-operative bank to which Banking Regulation applies or any other company or institution issuing credit card|
|5||Receipt from any person for acquiring bonds or debentures issued by the company or institution (other than renewal)||Aggregating to Rs 10 lakh or more in an FY||A company or institution issuing bonds or debentures|
|6||Receipt from any person for acquiring shares (including share application money) issued by the company||Aggregating to Rs 10 lakh or more in an FY||A company issuing shares|
|7||Buyback of shares from any person (other than the shares bought in the open market)||Aggregating to Rs 10 lakh or more in an FY||Listed company purchasing its own securities under Section 68 of the Companies Act, 2013|
|8||Receipt from any person for acquiring units of one or more schemes of a mutual fund (other than transfer from one scheme to another)||Aggregating to Rs 10 lakh or more in an FY||A trustee of a mutual fund or any such other person authorised to manage the affairs of the mutual fund|
|9||Receipt from any person for sale of foreign currency including any credit of such currency to a foreign exchange card or expense in such currency through a debit or credit card or through the issue of travellers cheque or draft or any other instrument||Aggregating to Rs 10 lakh or more during an FY||Authorised person as referred to in Section 2(c) of the Foreign Exchange Management Act, 1999|
|10||Purchase or sale of immovable property||Transaction value or valuation of stamp duty authority referred in Section 50C for an amount of Rs 30 lakh 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||Cash receipt for sale, by any person, of goods or services of any nature (other than those specified at Sl. Nos. 1 to 10)||Exceeding Rs 2 lakh||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 Rs 12,50,000 or more in one or more current accounts of a person or Rs 2,50,000 or more in one or more accounts (other than a current account) of a person||A banking company or co-operative bank to which the banking regulation applies, Post Master General of a post office|
|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.||A banking company or co-operative bank to which the banking regulation applies, Post Master General of a post office|
As can be seen from the above monetary threshold for specified financial transactions except SI No 10 and 11, aggregation is required to analyse if the monetary threshold is being crossed.
While aggregating the amount, the following shall be noted:
1. All the accounts of the same nature as specified in column (2) of the above table maintained in respect of that person during the FY shall be taken into account
For example: If Mr A has two savings account of Rs 5 lakh each, in order to check the monetary threshold of Rs 10 lakh, the amount in both savings account need to be aggregated
2. All the transactions of the same nature as specified in column (2) of the above Table recorded in respect of that person during the FY shall be aggregated
For example: If Mr A has purchased shares for a value of Rs 5 lakh in September in an FY and Rs 6 lakh in November of the same FY, the value of both shares needs to be aggregated to check the monetary threshold of Rs 10 lakh.
3. In a case where the account is maintained or transaction is recorded in the name of more than one person like a joint account, attribute the entire value of the transaction or the aggregated value of all the transactions to all the persons.
For example: In case Mr A and Mr B holds two joint savings account of Rs 3 lakh and Rs 7 lakh, an aggregation of Rs 10 lakh is attributed to both Mr A and Mr B separately to check for monetary threshold.
SFT shall be submitted either in Form 61A (other reporting entities) or Form 61B (prescribed reporting financial institution). SFT shall be submitted electronically, under the 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 a Compact Disc or Digital Video Disc (DVD), along with the verification in Form-V on paper. SFT shall be submitted through the following procedure:
SFT in Form 61A shall be submitted on or before 31 May of the FY, immediately following the FY in which the transaction is recorded or registered.
Statement of reportable account in Form 61B shall be submitted by the prescribed reporting financial institution for every calendar year on or before 31 May of next year.
In case the SFT filed is considered to be defective by the concerned income-tax authority, same shall be intimated to the reporting entity/person by such authority and an opportunity 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 extended further by the income tax authority at his discretion on an application made on this behalf.
However, if a defect is not rectified within 30 days or such an extended period, such statement shall be treated as invalid and consequences of non-furnishing of SFT shall apply.
In case of non-furnishing of SFT within the due date, the prescribed income-tax authority may serve notice upon such person requiring him to furnish SFT within a period not exceeding 30 days from the date of service of such notice and he shall furnish the statement within the time specified in the notice.
If reporting person does not furnish the SFT within the original due date, a penalty of Rs 500 per day of default. Further, if no report is furnished even within the extended due date specified in the notice served upon the person, a penalty of Rs 1,000 per day will be levied from the day immediately following the day on which the specified time in the notice expires.
Overall, a penalty of Rs 500 per day from the expiry of the 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.
If any person who has furnished SFT, comes to know or discovers any inaccuracy in the information provided in the statement, he shall inform the inaccuracy in such a statement and furnish the correct information to the income tax authority or specified authority or agency within 10 days.
A penalty of Rs 50,000 will be levied on the prescribed reporting financial institution if it provides inaccurate information in the statement where: