Accumulation of black money has been one of the major threats to the Indian economy. The government of India along with the ministry of finance has been striving towards curbing black money and also widening the tax base and has taken numerous initiatives in this regard. 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 persons were required to submit ‘Annual Information Return(AIR)’ introduced in 2003 with respect to specified financial transactions under Section 285BA.

Later, Finance Act 2014 replaced Section 285BA and renamed it as ‘obligation to furnish statement of financial transaction or reportable account’ to widen the scope of specified persons and to introduce various other provisions. In this article, we have discussed provisions of Section 285BA and related Rules. We have covered the following topics:

1. What is statement of financial transaction?

SFT is a report of specified financial transactions by specified persons including prescribed reporting financial institution. Such specified persons who register, maintain or record such specified financial transaction are under a mandate to submit SFT to the income tax authority or such other specified authority or agency.

2. Specified transaction required to be reported

Financial transaction specifically required to be reported under Section 285BA are as follows:

  • Transaction of purchase, sale/ exchange of goods or property or right or interest in a property; or
  • transaction for rendering any service; or
  • transaction under a works contract; or
  • transaction by way of an investment made or an expenditure incurred; or
  • transaction for taking or accepting any loan or deposit

3. Nature and value of specified transaction required to be reported and specified persons who are required to report

Section 285BA authorizes 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 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 purchase of pre-paid instruments issued by Reserve Bank of India

 

Cash deposits in one or more current account of a person

 

Cash withdrawals from one or more current account of a person

Aggregating to Rs 10 lakh or more in a FY

 

 

Aggregating to Rs 10 lakh or more during the FY

 

Aggregating to Rs 50 lakh  or more in a FY

 

Aggregating to Rs 50 lakh  or more in a FY

A banking company or Co-operative bank to which 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 a FY A banking company or Co-operative bank to which Banking Regulation applies
Post-Master General of 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 a FY A banking company or Co-operative bank to which Banking Regulation applies
Post-Master General of post office
Nidhi Company as per Section 406 of the Companies Act, 2013
NBFC – Non banking financial company holding 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 a 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 a 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 a 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 a 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 a 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 foreign exchange card or expense in such currency through a debit or credit card or through issue of travellers cheque or draft or any other instrument Aggregating to Rs 10 lakh or more during a 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 lakhs 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 account of a person or Rs 2,50,000 or more in one or more account (other than current account) of a person A banking company or Co-operative bank to which Banking Regulation applies
Post Master General of 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 Banking Regulation applies
Post Master General of post office

4. Aggregation rule

As can be seen from the above monetary threshold for specified financial transaction except SI No 10 and 11, aggregation is required to analyze if monetary threshold is being crossed. While aggregating the amount, the following shall be noted:

  • 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 eg: If Mr. A has two savings account of Rs 5 lakh each, in order to check  monetary threshold of Rs 10 lakh, amount in both savings account need to be aggregated

  • 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 eg: If Mr. A has purchased shares for a value of Rs 5 lakhs in September in a FY and Rs 6 lakhs in November of the same FY, value of both shares need to be aggregated to check monetary threshold of Rs 10 lakhs

  • In a case where the account is maintained or transaction is recorded in the name of more than one person like joint account, attribute the entire value of the transaction or the aggregated value of all the transactions to all the persons

For eg: In case Mr. A and Mr. B holds two joint savings account of Rs 3 lakhs and Rs 7 lakhs, aggregation of Rs 10 lakhs is attributed to both Mr. A and Mr. B separately to check for monetary threshold

5. What forms to be used for furnishing SFT and what is the procedure to submit SFT?

SFT shall be submitted either in Form 61A (other reporting entities) or Form 61B (prescribed reporting financial institution).

SFT shall 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.

SFT shall be submitted through following procedure:

  • 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 this selection, appropriate ITDREIN will be generated and confirmation email and SMS will be sent to registered email id and mobile number respectively
  • 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)
  • Verify/enter PAN, Form Name, FY, Reporting entity category, Half year, upload type i.e., whether original/correction form /Nil statement
  • On successful validation of above details, upload the file along with digital signature certificate
  • Success message will be displayed 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

6. Due date of furnishing SFT

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. In case of financial transactions recorded or registered in FY 2017-18, the due date for furnishing SFT is 31 May 2018*.

Statement of reportable account in Form 61B shall be submitted by prescribed reporting financial institution for every calendar year on or before 31 May of next year.

*Information sought under SI No. 12 and 13 in the above Table being related to demonetization period, the due date was 31 January 2017

7. What is the remedy available if there is defect in the SFT submitted?

In case if 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 income tax authority at his discretion on an application made in this behalf. However, if defect is not rectified within 30 days or such extended period, such statement shall be treated as invalid and consequences of non-furnishing of SFT shall apply.

8. Consequences of failure to comply with Section 285BA and related Rules

Failure to furnish SFT

In case of non-furnishing of SFT within 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 original due date, 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, penalty of Rs 1000 per day will be levied from the day immediately following the day on which the specified time in the notice expires.

Overall, penalty of Rs 500 per day from the expiry of original due date till due date mentioned in the notice and Rs 1,000 per day beyond the due date specified in the notice.

Inaccurate information in SFT

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 statement and furnish the correct information to the income-tax authority or specified authority or agency within 10 days.

Special provision for penalty in case of prescribed reporting financial institution

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

  • inaccuracy is due to a failure to comply with the prescribed due diligence requirement or is deliberate on the part of that person; 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 prescribed income-tax authority or such other authority or agency; or
  • 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 as mentioned above

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