In order to monitor high-value transactions carried out by taxpayers, the Income-tax Law has introduced the concept of a statement of financial transactions or reportable account. This statement enables tax authorities to gather information regarding specific prescribed high-value transactions conducted by individuals throughout the year. The Income-tax Department keeps a track of specified financial transactions carried on by a person during the year on the basis of the information provided by certain prescribed entities in statement of financial transaction or reportable account.
What is Statement of Financial Transaction (SFT)?
According to Section 285BA of the Income Tax Act, 1961, specified entities (Filers) are obligated to provide a statement of financial transactions or reportable accounts. This requirement applies to specified financial transactions and any reportable accounts that were registered, recorded, or maintained by these entities during the financial year. The statement must be furnished to the income-tax authority or any other authority prescribed by the law.
Specified transactions required to be reported
Financial transactions 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
- Transaction for rendering any service
- Transaction under a works contract
- Transaction by way of an investment made or expenditure incurred
- Transaction for taking or accepting any loan or deposit
Forms to be used for furnishing SFT
SFT submissions must be made using either Form 61A (for other reporting entities) or Form 61B (for prescribed reporting financial institutions). These submissions should be made electronically, with a digital signature certificate, to either the Director of Income Tax (Intelligence and Criminal Investigation) or the Joint Director of Income Tax (Intelligence and Criminal Investigation). Alternatively, a Post Master General, Registrar, or Inspector General may provide the SFT on a computer-readable media such as a Compact Disc or Digital Video Disc (DVD), along with the paper-based verification in Form-V.
Due date of furnishing SFT
The SFT in Form 61A must be submitted on or before May 31st of the financial year immediately following the FY in which the transaction is recorded or registered. On the other hand, the statement of reportable account in Form 61B should be submitted by the prescribed reporting financial institution for each calendar year on or before May 31st of the next year.
Consequences of not furnishing statement of financial transaction
Failure to provide the statement of financial transaction or reportable account will result in penalties under section 271FA, with a fine of Rs. 500 per day of default. However, according to section 285BA(5), tax authorities have the power to issue a notice directing the person to submit the statement within a maximum period of 30 days from the date of notice.
In such cases, the person must furnish the statement within the specified time. If the person fails to do so, a penalty of Rs. 1,000 per day will be imposed starting from the day following the expiration of the specified time mentioned in the notice.
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