All you need to know about Specified Financial Transaction

All you need to know about Specified Financial Transaction

On 1stJune 2021, the CBDT came up with significant change in the Form 26AS. As per the new amendment, the taxpayers will know about his or her high value financial transactions directly in form 26AS (earlier banks or financial institution used to share information about the SFT). This information will help taxpayers to submit their “Specified Financial Transaction” report within the due date.

What is Specified Financial Transaction (SFT)?

SFT i.e. Specified Financial Transaction or Statement of Financial Transaction is the one kind of report which needs to be submitted by the specified persons under section 285BA of Income Tax Act,1962. This section records the transactions exceeding threshold limit including investment and expenditure done by taxpayers in FY.

Such specified persons who transact in such specified financial transaction are required to submit SFT to prescribed income tax authority

The following transactions are required to be reported;

·       Transaction of purchase, sale/ exchange of goods or property or right or interest in a property; or

·       Transaction for rendering any service; or

·       Transaction under a works contract; or

·       Transaction by way of an investment made or an expenditure incurred; or

·       Transaction for taking or accepting any loan or deposit

·       Nature and value of specified transaction required to be reported and specified persons who are required to report

·       Cash Deposits > ₹ 10 lac in saving bank account

·       Purchases of bank drafts, pay orders, etc > ₹ 10 lac in FY

·       Cash payment made for FD > ₹ 10 lac in a FY

·       Cash deposit or withdrawal > ₹ 50 lac current account in a FY

·       Cash received > ₹ 2 lac for sale of goods or rendering of services

·       Expenditure in foreign currency via debit card, credit card or travelers cheque > ₹ 10 lac in FY

·       Payment by credit card > ₹ 10 lac on FY

·       Credit Card bill paid in cash > ₹ 1 lac in FY

·       Purchase / sale of immovable property, stamp duty value > ₹ 30 lac

·       Mutual Funds investments > ₹ 10 lacs in FY

·       Purchase of bonds or debentures < ₹ 10 lacs in FY

·       Purchase of shares through Public Offer or right issue > ₹ 10 lacs

·       Share buy-back from a person > ₹ 10 lacs

Which transactions are required to submit mandatorily?

The Government also proposes compulsory file the returns by following persons;

-A person having bank transactions over ₹ 30 lacs

-Payment of rent over ₹ 40,000/-

-All professionals and businesses having turnover of Rs ₹ 50 lacs.

What forms to be used for furnishing SFT

· Form 61A:

The form 61A is generated under section 285 BA of Income Tax Act, 1961 read with rule 114E of Income Tax Rules 1962

Form 61A is a statement of Specified Financial Transactions that needs to be submitted by a notified taxpayer for the applicable financial year. This form prescribed the Statement of Specified Financial Transactions.

Following are the specified financial transactions are need to be reported exclusively in form 61A;


Individuals/Entities Responsible for Furnishing Form 61A

Type of Transaction
   
Transaction Limit   
   
Banking Companies   and Co-operative Banks   
   
Cash payment for   purchase of POs (Purchase orders) / DDs (Demand drafts)   
   
More than Rs. 10   lakhs annually   
   
Cash payment for   purchasing any prepaid RBI instruments like RBI bonds, etc.   
   
More than Rs. 10   lakhs   
   
Deposits or   withdrawals from a current account of an account holder   
   
More than Rs. 50   lakhs   
   
Banking   Companies, Co-operative Banks and Post Offices   
   
Deposits in one   or more accounts of an account holder   
   
More than Rs. 10   lakhs   
   
Banking Company,   Co-operative Bank, Post Master General of Post Office   
   
Aggregate cash   payment in a year against any credit card bill which is issued to a customer   in a year   
   
More than Rs. 1   lakhs   
   
Aggregate Online   payment of any credit card bill which is issued to a customer in a year   
   
More than Rs. 10   lakhs   
   
A company or an   institution issuing debentures or bonds   
   
Receipt from an   individual for acquiring such debentures/bonds   
   
More than Rs. 10   lakhs in a year   
   
A company issuing   shares   
   
Receipt from an   individual for acquiring such shares. This includes share application   money received.   
   
More than Rs. 10   lakhs in a year   
   
Listed companies   
   
Share buy-back   from a person   
   
More than Rs. 10   lakhs   
   
Manager/Trustee   of a Mutual Fund   
   
Receipt from an   individual acquiring the units of such Mutual Fund   
   
More than Rs. 10   lakhs   
   
A Dealer of   Foreign Exchange   
   
Receipt from a   person for sale of foreign currency or expenses incurred in such foreign   currency via a debit/credit card or via issue of draft or traveller’s cheque   or any other financial instrument   
   
More than Rs. 10   lakhs annually   
   
Inspector-General/Sub-Registrar   appointed under the Registration Act, 1908   
   
Sale/ Purchase by   a person of an immovable property   
   
More than Rs. 30   lakhs   
   
Persons liable   for audit under Section 44AB of the Income Tax Act   
   
Cash receipt for   sale of goods or rendering of services (other than the ones specified above)   
   
More than Rs. 2   lakhs   

Form 61B:

Requirement of filing form 61B arises for implementation of FATCA (Foreign Account Tax Compliance Act) and CRS (Common Reporting Standard). For this purpose, rule 114F, 114G and 114H are to be referred. These rules provide for due diligence procedure for identification of reportable accounts.

Once a Reporting Entity identifies reportable accounts or information about such transactions, then it needs to be filed in form 61B for the calendar year by 31st of May following the end of the calendar year.

What is the procedure to file SFT?

Step 1: log in and go to My Account>Manage ITDREIN (Income Tax Department Reporting Entity Identification Number)

Step 2: Click on “Generate New ITDREIN”

Step 3: Select form type and Reporting entity category and click on “Generate ITDREIN”.

Step 4: After this, appropriate ITDREIN will be generated and confirmation email and SMS will be sent to registered email id and mobile number of the person.

Step 5: Generated will now appear under My Account>Manage ITDREIN.

Step 6: Go to e-file>Upload Form ‘X’ (appropriate Form No appears based on the selection made during registration).

Step 7: Enter PAN, Form Name, FY, Reporting entity category, Half year, upload type i.e., whether original/correction form /Nil statement.

Step 8: On successful validation of above details, upload the file along with digital signature certificate.

Success message will be displayed on the screen on successful following the above procedure. The confirmation email and SMS will be sent to registered email id and mobile number respectively.

The authority will either accept or reject the uploaded file. But in case of rejection, reason for rejection would be mentioned then again correct form needs to submitted by following the same procedure given above.

Penalty for failure to furnish SFT

In case of failure of submitting of forms within due date then income tax authority may serve notice to furnish SFT within a period of 30 days from the date of service of such notice. The defaulter is required to submit the statement within the time specified in the notice.

The following penalties are applicable in case of failure;

· Failed to furnish SFT within an original due date – Rs 500 per day from the date of default

· Failed to furnish even within the extended due date specified in the notice – Penalty of Rs 1000 per day

Note: A penalty of Rs 500 per day from the expiry of original due date till due date mentioned in the notice and Rs 1,000 per day beyond the due date specified in the notice.

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