SFT - Statement Of Financial Transaction

Introduction, Applicability and Filing

Sanuja Shinde & CA Himanshu Rawlani

5/27/20254 min read

📄 Detailed Analysis: Statement of Financial Transaction (SFT) Return
Overview

Introduction

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.

The Statement of Financial Transaction (SFT) is a reporting mechanism requiring certain entities to submit details of significant financial transactions to the Income Tax Department. Governed by Section 285BA and Rule 114E, SFT is filed annually using Form 61A by May 31 of the following financial year. Transactions involving listed securities and mutual fund units are reported semi-annually.

Transactions Reported in SFT

SFT covers the following transactions:

  • High-value financial transactions

  • Dividend payments

  • Interest payments

  • Transactions in listed securities and mutual fund units

Guidelines

  • Report interest for each account/deposit, regardless of amount (excluding Jan Dhan Accounts).

  • Exclude tax-exempt interest (e.g., PPF, FCNR, Sukanya Samriddhi, Resident Foreign Currency Accounts).

  • Report full interest without deducting the ₹10,000 Section 80TTA exemption.

  • For joint accounts, assign interest to the primary account holder or as per Form 37BA.

  • For minors, report in the legal guardian’s name.

  • Submit separate reports for each account type (Savings, Time Deposit, Recurring Deposit, Others), aggregating interest per type.

  • Report the total interest paid/credited annually.

Verification

SFT must be signed and verified by the Designated Director:

  • Company: Managing Director or authorized Whole-time Director

  • Partnership Firm: Managing Partner

  • Proprietorship: Proprietor

  • Trust: Managing Trustee

  • Others: Person managing affairs

  • Non-residents: Power of Attorney holder

Consequences of Non-Compliance

Inaccurate Information

  • Correction: Inform the Income Tax Department within 10 days of discovering inaccuracies.

  • Defective SFT: Rectify within 30 days of notice (extendable). Uncorrected defects are treated as inaccurate.

  • Penalty (until September 30, 2024): ₹50,000 for inaccuracies due to:

    • Failure to comply with due diligence.

    • Deliberate errors.

    • Failure to report known inaccuracies or correct within 10 days.

  • Penalty (from October 1, 2024): ₹50,000 for:

    • Inaccurate information or failure to correct within 10 days.

    • Non-compliance with due diligence.

  • Additional Penalty: ₹5,000 if inaccuracies are due to false information by the account holder, recoverable from the account holder.

Non-Filing

  • Penalty: ₹500/day under Section 271FA for failure to file.

  • Notice: If not filed by the due date, a notice may extend the deadline by 30 days. Non-compliance incurs ₹1,000/day from the notice’s expiry.

Frequently Asked Questions

Who is required to Submit SFT statement?

SFT must be submitted by a Financial Institution, Depository, Mutual funds house, Company, etc, on the transaction made by their account holders. On submission of such a statement, the data will be reflected in the AIS of the taxpayers.

Do I need to report SFT transactions on my tax return?

SFT details will be reflected in your Form AIS, SFT transactions can be both at the Income / Sale side (SB Interest, Sale of Stock / MF) or from the Expense / Purchase side (Purchase of stocks / MF / Immovable property etc).

Transaction from the sale side might be important since it is required to be disclosed in your ITR form and will be relevant to tax calculation. Transactions from the Expense / Purchase side might not directly impact your tax filing. However, any significant deviation between the Expenses and the Income might attract an Income tax notice.

What is SFT information in AIS?

SFT—Statement of Financial Transactions are specified or reportable financial transactions that took place during the financial year, such as the Purchase of Mutual funds, Stocks, Cash Deposits exceeding Rs 10 lakhs, etc. Banks and other financial intermediaries will report such specified transactions to the income tax department, which will further be reflected in the respective taxpayer’s AIS.

How do I download SFT from the income tax portal?

Details of SFT are available in your income tax portal. Once you log in to the income tax portal, go to AIS in the dashboard. Here, under SFT Information, all such details will be reflected.

What is Form 61A?

Form 61A is the statement of Specified Transactions is furnished by the reporting entities to the Income Tax Department, giving details about high values transactions.

Is there a remedy if a reporting entity fails to file a statement of specified financial transactions within the prescribed time?

If a reporting entity fails to file a statement of specified financial transactions to the income tax department within the prescribed time, the income tax department will issue a notice to the reporting entity requiring it to file the statement within 30 days of the issuance of such notice.

Conclusion

The SFT ensures transparency by requiring entities to report significant financial transactions. Compliance involves timely electronic filing, accurate data, and taxpayer communication for AIS reconciliation. Non-compliance attracts penalties, emphasizing the need for diligence. Understanding SFT helps entities meet regulatory requirements effectively.
In conclusion, filing the SFT Preliminary Response is a statutory obligation applicable to all specified persons, irrespective of whether any reportable financial transactions have occurred during the financial year. By submitting this response, the entity confirms its compliance status under Rule 114E of the Income-tax Rules, 1962. Failure to furnish this response, even in the absence of transactions, may attract notices or penalties.