Statement
of Financial Transactions (SFTs).
To keep a watch on high value transactions undertaken by
the taxpayer, the Income-tax Law has framed the concept of ‘Annual
Information Return (AIR)’ which now substituted by statement of financial
transactions (SFTs). With the help of the statement the tax authorities
will collect information on certain prescribed high value transactions
undertaken by a person during the year. Statement of financial transaction or
reportable account is to be filed by certain prescribed entities (discussed
later), and in such statement, they are required to furnish the details of
specified financial transactions or any reportable account registered/recorded/maintained
(discussed later) by them during the year. Thus, based on the information
provided by certain prescribed entities in statement of financial transaction
or reportable account, the Income-tax Department keeps a track of specified
financial transactions carried on by a person during the year.
Basic provisions
As per Section 285BA of the Income Tax Act, 1961 (as
substituted by Finance Act, 2014 w.e.f 01-04-2015), specified entities (Filers)
are required to furnish a statement of financial transaction or reportable
account (hereinafter referred to as ‘statement’) in respect of specified
financial transactions or any reportable account registered/recorded/maintained
by them during the financial year to the income-tax authority or such other
prescribed authority.
Persons
required to file statement of financial transaction or reportable account
Following persons
shall be required to furnish statement of financial transactions or reportable accounts
registered or recorded or maintained by them during a financial year to the
prescribed authority:
(a) an assessee;
(b) the prescribed
person in the case of an office of Government;
(c) a local authority
or other public body or association;
(d) the Registrar or
Sub-Registrar appointed under section 6 of the Registration Act, 1908 (16 of
1908);
(e) the registering
authority empowered to register motor vehicles under Chapter IV of the Motor
Vehicles Act, 1988 (59 of 1988);
(f) the Post Master
General as referred to in clause (j) of section 2 of the Indian Post Office Act,
1898 (6 of 1898);
(g) the Collector
referred to in clause (g) of section 3 of the Right to Fair Compensation and Transparency
in Land Acquisition, Rehabilitation and Resettlement Act, 2013 (30 of 2013);
(h) the recognised
stock exchange referred to in clause (f) of section 2 of the Securities Contracts
(Regulation) Act, 1956 (42 of 1956);
(i) an officer of the Reserve
Bank of India, constituted under section 3 of the Reserve Bank of India Act,
1934 (2 of 1934);
(j) a depository referred to in
clause (e) of sub-section (1) of section 2 of the Depositories Act, 1996 (22 of
1996); or
(k) a prescribed reporting financial institutions
Transactions
that are required to be reported
The statement of
financial transaction shall be furnished by every person mentioned in column (3)
of the Table below in respect of all the transactions of the nature and value
specified in the corresponding entry in column (2) of the said table, which are
registered or recorded by him on or after the 1st day of April, 2016, namely: -
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Sr. No.
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Nature and value of transaction
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Class of person (reporting person)
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1.
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(a) Payment
made in cash for purchase of bank drafts or pay orders or banker's cheque of
an amount aggregating to Rs. 10 lakhs or more in a financial year.
(b) Payments
made in cash aggregating to Rs. 10 lakhs or more during the financial year
for purchase of pre-paid instruments issued by Reserve Bank of India.
(c) Cash
deposits or cash withdrawals (including through bearer's cheque) aggregating
to Rs. 50 lakhs or more in a financial year, in or from one or more current
account of a person.
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A banking companies
or
a co-operative
Bank
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2.
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Cash deposits
aggregating to Rs. 10 lakhs or more in a financial year, in one or more
accounts (other than a current account and time deposit) of a person.
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(i) A banking
company or a cooperative
bank
(ii) Post
Master General
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3.
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One or more
time deposits (other than a time deposit made through renewal of another time
deposit) of a person aggregating to Rs. 10 lakhs or more in a financial year
of a person.
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(i) A banking
company or a cooperative
bank
(ii) Post
Master General
(iii) Nidhi
Company
(iv)
Non-banking financial
Company
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4.
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Payments made
by any person of an amount aggregating to—
(i) Rs. 1
lakhs or more in cash; or
(ii) Rs. 10
lakhs or more by any other mode,
against bills
raised in respect of one or more credit cards issued to that person, in a
financial year.
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A banking
company or a cooperative bank or any other company
or
institution
issuing credit card.
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5.
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Receipt from
any person of an amount aggregating to Rs. 10 lakhs or more in a financial
year for acquiring bonds or debentures issued by the company or institution
(other than the amount received because renewal of the bond or
debenture
issued by that company).
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A company or
institution issuing
bonds or
debentures.
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6.
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Receipt from
any person of an amount aggregating to Rs. 10 lakhs or more in a financial
year for acquiring shares (including share application money) issued by the
company.
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A company
issuing shares.
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7.
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Buy back of
shares from any person (other than the shares bought in the open market) for
an amount or value aggregating to Rs. 10 lakhs or more in a financial year.
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A company
listed on a recognised stock exchange purchasing its own securities under
section 68 of the Companies Act, 2013
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8.
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Receipt from
any person of an amount aggregating to Rs. 10 lakhs or more in a financial
year 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).
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A trustee of
a Mutual Fund or such other person managing the affairs of the Mutual Fund
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9.
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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 of an amount aggregating to Rs. 10 lakhs or more during a
financial year.
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Authorised
person under Foreign Exchange Management Act, 1999
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10.
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Purchase or
sale by any person of immovable property for an amount of Rs. 10 lakhs or
more or valued by the stamp valuation authority referred to in section 50C of
the Act at Rs. 30 lakhs or more.
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Inspector-General
or Registrar or Sub-Registrar appointed under the Registration Act, 1908
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11.
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Receipt of cash
payment exceeding Rs. 2 lakhs for sale, by any person, of goods or services
of any nature (other than those specified at Sl. Nos. 1 to 10 of this rule,
if any.)
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Any person who is
liable for audit under section 44AB of the Act.
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The periodicity and due date of furnishing statement of
financial transaction or reportable account
The statement of financial transaction shall be furnished
electronically (under digital signature) in Form No. 61A to the Director of
Income-tax (Intelligence and Criminal Investigation) or the Joint Director of
Income-tax (Intelligence and Criminal Investigation). However, a Post Master General
or a Registrar or an Inspector General may furnish Form No. 61A in a computer readable
media being a Compact Disc or Digital Video Disc (DVD), along with the
verification in Form-V on paper. Further, the statement shall be furnished on or before 31st May immediately
following the financial year in which the transaction is registered or
recorded. However, section 285BA(5) empower the tax authorities to
issue a notice to the person who had not filed the statement within due date.
In such a case, the tax authorities may serve upon such person a notice
requiring him to furnish the statement within a period not exceeding 30 days from
the date of service of such notice and in such a case the person shall furnish
the statement within the time as specified in the notice.
Consequences of not furnishing statement of financial
transaction or reportable account
Non-furnishing of
statement of financial transaction or reportable account will attract penalty under
section 271FA. Penalty can be levied of Rs. 100 per day of default. However,
section 285BA(5) (as discussed earlier) empower the tax authorities to issue a
notice to the person directing him to file the statement within a period not
exceeding 30 days from the date of service of such notice and in such a case
person shall furnish the statement within the time specified in the notice. If
person fails to file the statement within the specified time, then a penalty of Rs. 500 per
day will be levied from the day immediately following the
day on which the time specified in such notice for furnishing the statement
expires.
Inaccurate or defective statement of financial
transaction or reportable account
If any person, after filing the statement, comes to know
or discovers any
inaccuracy in the information provided in the statement, he shall
inform such inaccuracy to the prescribed income tax authority within a period of ten days and
furnish the correct information. On the other hand, the prescribed income-tax
authority may also intimate the defect to the person and give him an
opportunity of rectifying the defect within a period of thirty days from the
date of such intimation or within such extended period as may be allowed by
prescribed income-tax authority. However, if a person fails to rectify the defect within the
said period than such statement shall be treated as an invalid statement and
the provisions of this Act shall apply as if such person had failed to furnish
the statement.
Consequences of filing inaccurate or defective statement
of financial transaction or reportable account
As per section 271FAA of the Income-tax Act,
if a prescribed reporting financial institution referred to in Section
285BA(1)(k) who is required to furnish statement of financial transaction or
reportable account, provides inaccurate
information in the statement, and where:
(a) the inaccuracy is due to a failure to comply with the
due diligence requirement as prescribed under rule 114H of the Income-tax
Rules, 1962 or is deliberate on the part of that person;
(b) the person knows of the inaccuracy at the time of
furnishing the statement but does not inform the prescribed income-tax
authority or such other authority or agency;
(c) the person discovers the inaccuracy after the
statement is furnished and fails to inform and furnish correct information within a period of 10
days as specified under section 285BA(6), then, the prescribed
income-tax authority may direct that such person shall pay, by way of penalty, a sum of fifty
thousand rupees.
Registration
Every reporting person mentioned in column 3 of the Table
(supra) shall communicate to the Principal Director General of
Income-tax (Systems) the name, designation, address and telephone number of the
Designated Director and the Principal Officer and obtain a registration number.
"Designated
Director" means a person designated by the reporting person to
ensure overall compliance with the obligations imposed under section 285BA and
rules 114B to 114E and includes—
(i) the Managing Director or a whole-time Director duly
authorised by the Board of Directors if the reporting person is a company;
(ii) the managing partner if the reporting
person is a partnership firm;
(iii)the proprietor if the reporting
person is a proprietorship concern;
(iv) the managing trustee if the reporting
person is a trust;
(v) a person or individual, who controls and
manages the affairs of the reporting entity if the reporting
person is, an unincorporated association or, a body of individuals or, any other
person.
Furnishing of statement of financial transaction and
reportable account by prescribed
reporting financial institution
In order to facilitate effective exchange of information
in respect of resident and non-resident, Section 285BA also provides for
furnishing of statement by a prescribed reporting financial institution in
respect of specified financial transaction or reportable account. The statement shall be
furnished for each calendar year in Form No. 61B on or before 31st May of the next year. [For
more details, see rules 114F, 114G and 114H of the Income-tax Rules, 1962]
