Introduction
The Indian Income Tax Department has progressively shifted toward data-driven tax administration. One of the most critical mechanisms supporting this transformation is the collection of financial transaction data through Specified Financial Transactions (SFT) filings. Earlier known as Annual Information Return (AIR), SFT was introduced to enhance tax compliance and transparency by collecting information on high-value transactions.
In this article, we’ll explore the complete landscape of SFT, including who needs to file, what needs to be filed, due dates, penalties for non-compliance, and FAQs for practical clarity.
What is SFT Filing?
Specified Financial Transactions (SFT) refer to certain high-value transactions carried out by individuals or entities during a financial year that are required to be reported to the Income Tax Department under Section 285BA of the Income-tax Act, 1961, read with Rule 114E of the Income-tax Rules, 1962.
SFT helps the department identify instances where income might not have been appropriately reported by taxpayers. It is a tool used to cross-verify the income declarations with actual financial behavior.
Legal Framework
- Governing Section: Section 285BA of the Income-tax Act, 1961
- Applicable Rules: Rule 114E of the Income-tax Rules, 1962
- Form: Form 61A
- Mode of Filing: Online through the Income Tax Reporting Portal (https://report.insight.gov.in)
Who is Required to File SFT?
The following entities/persons are required to furnish a Statement of Financial Transactions:
| S. No. | Reporting Person / Entity |
|---|---|
| 1 | Banks including cooperative banks |
| 2 | Post Master General |
| 3 | Companies issuing shares or bonds |
| 4 | Mutual Funds |
| 5 | Authorized persons under FEMA (Currency dealers) |
| 6 | Registrar/Sub-registrar |
| 7 | Companies issuing buybacks |
| 8 | Listed companies issuing dividends |
| 9 | Depositories |
| 10 | Persons liable for audit under Section 44AB, in specific cases |
| 11 | Any person or entity notified by the CBDT |
Key Reportable Transactions and Who Must Report
| Nature of Transaction | Threshold (Aggregate in FY) | Person/Entity Required to Report |
|---|---|---|
| Cash deposits in Savings Account | > ₹10,00,000 | Banks including cooperative banks |
| Cash deposits or withdrawals in Current Account | > ₹50,00,000 | Banks including cooperative banks |
| Time deposit (other than renewal) | > ₹10,00,000 | Banks, post offices, Nidhi companies, NBFCs |
| Credit card bill payments in cash | > ₹1,00,000 | Banks/Cooperative Banks/Issuers |
| Credit card bill payments (any mode) | > ₹10,00,000 | Banks/Cooperative Banks/Issuers |
| Purchase of shares (including through demat) | > ₹10,00,000 | Listed Companies/Registrar/Depositories |
| Purchase of debentures or bonds | > ₹10,00,000 | Companies issuing them |
| Purchase of Mutual Fund Units | > ₹10,00,000 | Mutual Funds |
| Buyback of shares from any person | > ₹10,00,000 | Listed Companies undertaking buyback |
| Receipt from sale of foreign currency (including traveler’s cheques, forex cards, etc.) | > ₹10,00,000 | Authorized persons under FEMA (e.g., forex dealers) |
| Purchase or sale of immovable property | ≥ ₹30,00,000 | Registrar/Sub-Registrar under Registration Act |
| Cash receipts for sale of goods or services | > ₹2,00,000 | Persons liable for audit under Section 44AB |
Due Date for SFT Filing: May 31st
- The due date for filing SFT is 31st May following the end of the financial year.
- For example, for FY 2024–25, the due date will be 31st May 2025.
Procedure for Filing SFT (Form 61A)
- Registration on Reporting Portal:
- Visit https://report.insight.gov.in
- Login using the principal officer’s PAN and password.
- Register as a “Reporting Entity”.
- Preparation of Form 61A:
- Use the provided utility to generate XML
- Or use integrated solutions (Gen TDS, ClearTDS, etc.)
- Upload the Form:
- After XML is generated and digitally signed, upload it on the portal.
- Acknowledgment will be generated.
- Correction/Modification:
- Errors can be rectified by filing a correction statement.
Consequences of Non-Compliance
| Nature of Default | Penalty |
|---|---|
| Failure to furnish SFT within due date | ₹500/day (Section 271FA) |
| Continued default after notice from the department | ₹1,000/day |
| Inaccurate or incorrect information | ₹50,000 (Section 271FAA) |
Common Errors in SFT Filing
- Mismatched PANs of parties involved.
- Incorrect transaction categorization (e.g., treating equity as mutual fund).
- Filing without digital signature (DSC) or with an expired DSC.
- Submitting multiple original statements instead of corrected ones.
- Ignoring aggregate thresholds, especially for cash transactions.
Data Usage by the Income Tax Department
The data filed via SFT is used by the Income Tax Department in various ways:
- Pre-filled ITRs: Taxpayers can view their reported transactions in Form 26AS or AIS.
- Scrutiny assessments: To flag under-reported income.
- Compliance notices: Non-reporting taxpayers may be issued e-verification or compliance notices under Section 133(6).
- Risk profiling: Used in CASS (Computer-Assisted Scrutiny Selection) for risk-based scrutiny selection.
Recent Developments & Clarifications
- From FY 2020–21 onwards, the scope of SFT was extended to cover dividends, capital gains, and interest income for AIS (Annual Information Statement).
- Taxpayers can now view the reported transactions under SFT in the AIS portal.
- The Insight portal is fully integrated with PAN data to ensure better monitoring.
Frequently Asked Questions (FAQs)
Q1. Is it mandatory for individuals to file SFT?
No, individuals are not required to file SFT unless they are:
- Covered under Section 44AB (i.e., liable to tax audit), and
- Have received cash against sale of goods/services > ₹2 lakhs.
Q2. What happens if my PAN is wrongly quoted in someone else’s SFT?
You can log in to the AIS portal, raise a feedback request to remove the incorrect transaction from your record. The department will process it accordingly.
Q3. Can I revise SFT after submission?
Yes. Correction statements can be filed if the original submission had errors. However, filing multiple original returns is prohibited.
Q4. Where can I view the transactions reported under my PAN?
You can view them in:
- Form 26AS (Part E)
- AIS (Annual Information Statement) – https://www.incometax.gov.in
Q5. Are SFT filings applicable to NPOs or NGOs?
Generally, No, unless they are issuing or receiving high-value donations or involved in financial transactions crossing the threshold limits.
Q6. Is TDS required on SFT transactions?
TDS is independent of SFT. However, certain transactions such as immovable property sales, interest income, or rent may attract TDS provisions.
Q7. What if I miss the SFT deadline?
If you miss the 31st May deadline:
- File it immediately to avoid increasing penalties.
- A show cause notice may also be issued.
Q8. Can transactions be reported voluntarily?
No. Only transactions meeting the specified thresholds must be reported. Voluntary or excessive reporting may trigger unnecessary scrutiny.
Q9. Is there a need to submit NIL SFT if no transactions occurred?
Some entities (e.g., banks, mutual funds) are required to file a ‘NIL statement’ if no reportable transactions occurred. The Income Tax portal typically prompts such filings.
Q10. Are foreign transactions reportable under SFT?
Only transactions occurring within India and reported by domestic financial institutions are covered under SFT. Foreign asset disclosures fall under different sections (e.g., Schedule FA in ITR).
Conclusion
The SFT filing framework is a robust compliance mechanism that aids the Income Tax Department in matching income declared with actual financial behavior. For businesses and reporting entities, it’s crucial to set up internal controls, ensure accurate PAN collection, and automate report generation to meet filing obligations smoothly.
With evolving regulations and increasing scrutiny, staying updated and timely in SFT filing is essential—not just for compliance but also to maintain reputational integrity with tax authorities.
Stox N Tax 
Leave a comment