SECTION 285BA R.W.R.
RULE 114E ON STATEMENT
OF FINANCIAL TRANSACTIONS (SFT) (FORM 61A)
.
What is Statement of Financial
Transactions(SFT)?
Statement of financial transactions or
SFT refers to information related to
certain high-value transactions which
specified persons are required to
report to the Income Tax Department.
The SFT was earlier known as
‘Annual Information Return (AIR).
Objectives of introducing SFT:
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.
. Section 285BA of the Income Tax
Act, 1961 deals with Statement of
Financial Transaction. It requires
Specified Reporting Persons to a
furnish statement, in a specified
form and manner, of specified
financial transaction.
"specified financial transaction" means any—
(a) transaction of purchase, sale or exchange of
goods or property or right or interest in a
property; or
(b) transaction for rendering any service; or
(c) transaction under a works contract; or
(d) transaction by way of an investment made or
an expenditure incurred; or
(e) transaction for taking or accepting any loan
or deposit,
which may be prescribed :
Provided that the Board may prescribe
different values for different transactions in
respect of different persons having regard to
the nature of such transaction. The Board has
further widened the scope of SFT.
.
Latest update as on 13 August, 2020
The scope of Statement of Financial
Transactions (SFT) has been expanded to
widen the tax base. The notified persons
should report the following transactions in
their SFT:
1. Payment to hotels above Rs. 20,000
2. Payment of property tax above Rs. 20,000
3. Payment of health insurance premium above
Rs.20,000
4. Payment of rent above Rs. 40,000
5. Payment of life insurance premium above Rs.
50,000
6. Electricity consumption above Rs.1 lakh
7. Payment of educational fee/donations above
Rs.1 lakh p.a.
8. Purchase of jewelry, white goods, painting,
marble etc. above Rs.1 lakh
9. Deposit/credits in the current account above
Rs.50 lakh
10. Deposit/credits in the non-current account
such as savings accounts above Rs.25 lakh
11. Domestic business class air travel or foreign
travel
12. Share transactions/D-MAT accounts/Bank
lockers
Due Date for filing SFT in Form
61A:
Rule 114E of the Income Tax Rules, 1962
states that the statement of financial
statement must be furnished in Form 61A.
The statement of financial transactions shall
be furnished on or before the 31st May,
immediately following the financial year in
which the transaction is registered or
recorded. This rule further provides nature
and value of transaction as well as class
of persons required to furnish the report.
Significant Changes in SFT
SFT – Changes in Monetary Limits
Other Changes in SFT
Form 61A- Statement of Financial
Transactions
As per Rule 114E, the Statement of Financial
Transactions must be filed in Form 61A. The due
date of filing such form is 31st May of next year for
every previous financial year where the transaction
occurs.
If an entity hasn’t entered into any of Specified financial
transactions in the financial year but falls into the
reporting class of person as provided under the
provisions of the Income Tax Act, do they still require to
furnish a NIL SFT in Form 61A?
There is no concrete answer to the above query.
However, in our opinion, to avoid unnecessary
litigation, the entity should furnish a NIL SFT Report.
Different parts of Form 61A
Form 61A has two parts. Part A which contains
statement level information is common for all
transaction types.
The report level information has to be reported in
one of the following parts (depending on the
transaction type):
– Part B (Reporting of aggregated financial
transactions by the person)
– Part C (Reporting of bank accounts)
– Part D (Reporting of immovable property
transactions)
Process of filing SFT online:
• Register on the Reporting portal under My
Account menu.
• All statements uploaded to the Reporting
Portal should be in the XML format consistent
with the prescribed schema published by the
Income Tax Department.
• Once XML is generated, sign and encrypt the
XML using the Submission utility and prepare
package to be uploaded.
• Submit the statement on Reporting Portal.
• Upon successful submission,
an email with “Acknowledgment Number” will be
sent to the registered email id.
Penalty for default in furnishing of Form 61A
A penalty u/s 271FA of Rs 500 per day shall
be levied for the initial failure to file within due
date. The authorities would issue a notice to
such an assessee, demanding the assessee to
submit the form within 30 days from issuance
of such notice. In case such assessee
continues to be the assessee in default by not
answering to such notice, a penalty would be
levied on the assessee that would amount to
Rs 1000 per day of such default. This penalty
would be calculated from the expiry of the
period as stipulated in such notice.
SFT AND FORM 26AS
The income tax department vide a Press Release
dated 18th July 2020 informed that Part-E of
the new Form 26AS will show Specified
Financial Transactions (SFT) from “specified
persons" like banks, mutual funds, institutions
issuing bonds and registrars or sub-registrars etc.,
under section 285BA of Income-tax Act, 1961.
The objective of improving the Form 26AS is to
enable a taxpayer to file his income tax return
correctly and smoothly without missing any
financial transactions carried out by the taxpayer
during a financial year. The new Form 26AS will
act as a ready reckoner for the taxpayer. This will
help the taxpayer in computing his total income
correctly and consequently, the tax liability.