Filing of SFT (Statement of Financial Transaction) ​

What is a Statement of Financial Transaction (SFT)?

An SFT is a report required by certain specified persons and entities to provide information about certain financial transactions. This information is reflected in the Annual Information Statement (AIS) of the taxpayer, helping them to accurately file their Income Tax Return (ITR) and enabling the Income Tax Department to monitor and prevent illicit financial activities.
The accumulation of black money poses a significant threat to the Indian economy. To combat this issue, the Indian government has launched several initiatives, one of which is the requirement for a Statement of Financial Transaction (SFT) under Section 285BA of the Income Tax Act. Initially introduced as the 'Annual Information Return (AIR)' in 2003, it was renamed in 2014 to 'duty to produce a statement of financial transaction or reportable account'.

Specified Transactions Required to be Reported :

Transactions that must be reported under Section 285BA include:

• Purchase, sale, or exchange of goods or property, or any right or interest in a property
• Rendering any service
• Transactions under a works contract
• Investments made or expenditures incurred
• Taking or accepting any loan or deposit

Nature, Value, and Person Responsible to Report a Specified Transaction Section 285BA authorizes the Central Board of Direct Taxes (CBDT) to prescribe the values and persons responsible for reporting different financial transactions. The prescribed limits and responsible persons are as follows:

Forms to be Used for Furnishing SFT and the Procedure to Submit SFT

SFT can be submitted using:

• Form 61A for other reporting entities.
• Form 61B for prescribed reporting financial institutions.

Submission Procedure:

• New Registration and Generation of ITDREIN:
  • Log in to the income tax e-filing portal.
  • Navigate to Pending Action >> Reporting Portal >> Reporting Entities.
  • Select New Registration, applicable Form, and entity category.
  • Complete the entity details in Form 61A or Form 61B and fill in the principal officer details with a digital signature.
  • After submission, the principal officer will receive an email for ITDREN activation and login credentials.
• Report Generation and Validation:
  • Log in to the insights portal using the principal officer’s PAN.
  • Select the Form and ITDREN.
  • Download the Report Generation and Validation Utility.
  • Prepare the reporting package and upload the XML file using a digital signature.
  • Check the status for any errors and rectify if necessary.

Due Date of Furnishing SFT

• Form 61A: On or before 31st May of the FY following the FY in which the transaction was recorded.

• Form 61B: By 31st May of the next calendar year for the prescribed reporting financial institution.

Remedy for Defects in Submitted SFT

If an SFT is deemed defective, the reporting entity will be notified and given 30 days to rectify the defect. This period can be extended upon request. Failure to rectify will result in the statement being treated as invalid, and penalties will apply.

Consequences of Failure to Comply with Section 285BA and Related Rules

Consequence on Failure to Furnish SFT

• Penalty of Rs 500 per day from the original due date till the date specified in the notice.
• Penalty of Rs 1,000 per day beyond the notice date.

Special Provision for Penalty for Prescribed Reporting Financial Institutions

• A penalty of Rs 50,000 for inaccurate information due to non-compliance, deliberate inaccuracies, or failure to correct inaccuracies within 10 days of discovery.

  Additional Information for Pre-filing of ITR Rule 114E(5A) consolidates information for pre-filing ITR, including:

  • Capital gains on transfer of listed securities or mutual fund units.
  • Dividend income
  • Interest income from banks, post offices, and NBFCs.