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SFT AND ITS APPLICABILITY

  • Posted By SuperCA
  • On 05 January

SFT AND ITS APPLICABILITY
 
INTRODUCTION
 
Statement of Financial Transactions (SFT) is a record of the statement of specified financial transactions which are to be furnished under Section 285BA of the Income Tax Act, 1961. Rule 114E of the Income Tax Rules, 1962  requires Statement of Financial Transactions to be furnished in Form No. 61A.
 
As per Section 285 BA, "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) the transaction under a works contract; or
(d) transaction by way of an investment made or expenditure incurred; or
(e) transaction for taking or accepting any loan or deposit,
      which may be prescribed by the Board in this regard.
 
 
FORMS USED FOR FURNISHING SFT
 
Form 61 has two parts:
 
i.61A contains particulars of the reporting person and whether the statement is original or revised.
ii.61B contains details of the transacting person and of financial transactions undertaken.
 
WHO NEEDS TO FURNISH SFT IN FORM 61A?
  
IDENTIFYING TRANSACTIONS TO BE REPORTED – SUB-RULES OF RULE 114E

Class of persons (reporting person)

Nature and Value of Transaction

Banks

Cash payment for purchase of DDs/POs of amount aggregating Rs 10 lakh or more in a year ET

Banks

Cash payment of Rs 10 lakh or more for purchase of prepaid RBI instruments (RBI bonds, etc.)

Banks

Cash deposit/withdrawal aggregating Rs 50 lakh or more from current a/c of a person

Banks/Post Master General

Cash deposit aggregating Rs 10 lakh or more in any one or more accounts of a person (other than current account and time deposit)

Banks/Post Master General/Nidhi/NBFC

One or more time deposits (other than those through renewal of another time deposit) of a person aggregating Rs 10 lakh or more

Banks

Payment in cash aggregating in a year Rs 1 lakh or more (in cash) or Rs 10 lakh or more (by any other mode) against credit card bill issued to a person during the year

Company/Institution issuing bonds/debentures

Receipt aggregating Rs 10 lakh or more in a year from a person for acquiring bonds/debentures

Company issuing shares

Receipt from a person aggregating Rs 10 lakh or more for acquiring shares (including share application money)

Company listed in recognized stock exchange

Buy back of shares from any person (other than bought from open market) for an amount aggregating Rs 10 lakh or more

Mutual Fund Trustee/Manager

Receipt from a person aggregating Rs 10 lakh or more for acquiring units of Mutual Fund

Foreign Exchange Dealer

Receipt from a person for sale of foreign currency, including against foreign exchange card or expenditure in such currency against debit/credit card or issue of travelers cheque or draft aggregating Rs 10 lakh or more

IG Registration or Registrar/Sub-Registrar of Property

Purchase/Sale by any person of immovable property for Rs. 30 lakh or more or valued by the stamp valuation authority at Rs 30 lakh or more

Any person liable for audit u/s 44AB of the Act

Receipt of cash payment exceeding Rs 2 lakh by any person for sale of goods/services (other than those specified above)

 
 
SFT is submitted through the following procedure:
 

• If already registered in the e-filing portal, login and manage My Account> ITDREIN (Income Tax Department Reporting Entity Identification Number)

• Click on ‘Generate New ITDREIN’

• Select the form type and the reporting entity category and click on ‘Generate ITDREIN’

• Based on this option, the appropriate ITDREIN will be generated and confirmation email and SMS will be sent to the registered email id and mobile number respectively

• Created ITDREIN Now Manage My Account> ITDREIN

• E-File> Upload Form ‘X’ (Appropriate Form Number will appear based on the selection made during registration)

• Verify PAN, Form Name, FY, Reporting Entity Category, Half Year, Upload Type i.e. Original / Correction Form / Nil Statement.

• After successful verification of the above details, upload the file along with the digital signature certificate.

•  A successful message will be displayed on the screen in a successful upload and confirmation email and an SMS will be sent to the registered email id and mobile number.

• Uploaded files can be 'accepted' or 'rejected'. In case of rejection, the reason for rejection is mentioned and the correction form is submitted by the above procedure.

 
DUE DATE FOR FURNISHING SFT
 
The due date of filing the SFT transaction in Form 61A is 31st May, immediately following the financial year in which the transaction is registered or recorded. Example: For the FY 2019-20 the due date will be 31st May 2020.
The report of the reportable account in Form 61B is submitted by the reporting financial institution on or before May 31 of the following year for each calendar year.
Note: Due to COVID-19, the due date of SFT compliance for FY 2019-20 has been extended from 31st May, 2020 to 31st March, 2021.
 
REMEDY FOR DEFECT IN FURNISHING SFT
 
If the SFT related to income-tax authority filed is deficient, the reporting entity/person will be notified by the same authority and will have the opportunity to rectify the error within 30 days from such date. This deadline for correcting the default may be further extended at the discretion of the Income Tax Authority on the application made by the entity/person on this behalf. However, if the error is not corrected within 30 days or during such an extended period, such statement shall be deemed invalid and the consequences of not filing SFT shall apply.
 
CONSEQUENCES FOR FAILURE TO FURNISH SFT
 
As per section 271FA, if the reporting person does not submit the SFT by the actual due date (i.e 31st May of nest FY), than Rs. 500 per day by default will be charged. In addition, if no report is filed even after the extended expiry date mentioned in the notice given to the person, a penalty of Rs.1000 / - per day will be levied from the day following the expiry date of the time specified in the notice.
In total, a penalty of Rs.500 / - per day from the date of expiration of the notice will be charged.
 
 
 
CONSEQUENCES OF FAILURE TO CORRECT INACCURATE OR DEFECTIVE SFT
 
A fine of Rs 50,000 will be levied on the indicated reporting financial institution for providing incorrect information in the statement:

• the inaccuracy is due to a failure to comply with the requirement prescribed under section 285BA(7) or is deliberate on the part of that person;

• the person is aware of the inaccuracy at the time of filing the statement of financial transaction or reportable account, but does not notify the income-tax authority or other authority or agency; 

• The person finds out the fault after filing the statement of financial transaction or reportable account and fails to report and provide correct information within 10 days as stated in section 285BA(6).

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