Statement of Financial Transaction Under Section 285BA

A statement of financial transactions, or SFT, is a reporting mechanism under which specified entities are obligated to provide details and information about their material financial transactions to the Income Tax Department.

It is furnished in Form 61A and 61B according to the provision of Section 285BA. The purpose of providing the annual information return under Section 285BA is to keep an eye on the high-value transactions made by taxpayers during the financial year.

Below are the transactions that need to be reported in the statement of financial transaction by the specified person:

• High-value transactions
• Payment of interest
• Payment of dividend
• Transaction in units of mutual funds and listed securities

For instance, if a customer deposits ₹12 lakh in cash into their account during the financial year, the bank would report this transaction under SFT to the Income Tax Department, as it exceeds the threshold set for reporting cash transactions, which is ₹10 lakh.

The SFT would include details like the customer's name, PAN, account number, transaction date and amount deposited.

Also Read: Who Should File Income Tax Return?

The income tax authority of India has decided the value and nature of transactions for various entities that will help in deciding when to do SFT filing. The below table will help in understanding the same:

Aggregation is required to calculate if the value of the SFT transaction limit has been exceeded. The following things need to be noted at the time of aggregation:

• All the accounts of individuals of the same nature need to be aggregated for the financial year. In simple words, if a person has two savings accounts with a balance of ₹6 lakhs in each, then both accounts need to be aggregated to check the monetary threshold, which is ₹10 lakhs.
• All the transactions of individuals of the same nature need to be aggregated for the financial year. For example, if a person purchased a share of ₹5 lakh in July and then again purchased shares for ₹5 lakh in November of the same year, both transactions need to be aggregated.
• For a transaction made under a joint account, the entire transaction value should be aggregated to both persons. In simple words, if two people have joint savings of ₹6 lakhs and ₹4 lakhs, then the aggregation would be done to both parties separately to check the threshold limit.

The following documents are required at the time of SFT filing:

• Form 61A for other entities.
• Form 61B for specified reporting companies or institutions.
• Valid PAN card.
• Copy of Digital signature.

Note that the exact documents required may change from time to time, so checking the official website before conducting the procedure online is best.

Also Read: Form 16a of Income Tax

To file or submit SFT, individuals need to follow these steps:

• Step 1: To initiate the SFT filing process, go to the Income Tax Department official website.
• Step 2: After that, log into the account using your username and password.
• Step 3: Once logged in, head to the "My Account" section.
• Step 4: Under that option, scroll down to the "Manage ITDREIN" option.
• Step 5: Further, click on the "Generate New ITDREIN" option.
• Step 6: Under that option, you need to choose the form type and category of reporting. Then, after choosing, click on "Generate ITDREIN".
• Step 7: After that, ITDREIN will be generated, and you will receive an email and SMS acknowledgement of the same.
• Step 8: Once this ITDREIN starts displaying on your account, navigate to the e-file and click "Upload Form Documents."
• Step 9: It will open a new form where you must verify all the details such as name, PAN, reporting category and more.
• Step 10: After verifying, upload a digital signature certificate. Once uploaded, you will get a confirmation message via email and SMS.

The statement of financial transaction submitted shall be signed, verified and furnished by the designated person. A designated person ensures overall compliance with SFT. The designated person includes:

• If the company files the SFT, then the managing director or director authorised by the board is responsible for verifying the statement of financial transaction.
• If the partnership firm files it, then the managing partner will be responsible for verifying the SFT.
• If it is filed by the proprietorship concerned, then the proprietor will be responsible for verifying the SFT.
• If it is filed by an unincorporated association or body of individuals, the person who manages and controls all the affairs is responsible for verifying the SFT.

Also Read: Benefits of Filing ITR (Income Tax Return)

All the SFT reporting should be done within the decided due date. According to Section 285BA of the Income Tax Act, form 61B of STF needs to be submitted before May 31st of the financial year.

Form 61A has to be furnished by the institution or entities on or before May 31st of the financial or calendar year.

• If there is a mistake in the submitted SFT and the income tax department has noticed it, then the IT department allows rectifying it within 30 days.
• The time frame can also be exceeded if the entity requests or presents its case to the income tax department. However, it should happen at the discretion of government authority.
• Further, if the entity fails to rectify its mistake or submit the modified SFT in a given time frame, the income tax department will treat the application as invalid. And the applicant needs to face the consequences of not submitting the SFT on time.

If the entity fails to furnish SFT within the time frame, then the income tax authority may notify the entity to submit SFT within 30 days. However, the person must pay the fine of ₹500 per day from the original due date.

However, if the entity fails to submit the SFT within 30 days, it must instantly pay the penalty of ₹1000 per day as of the date specified in the notice.

In some circumstances, a penalty of ₹50,000 will be levied on reporting financial institution if:

• The inaccuracy or mistake in the SFT is due to the failure to comply with due diligence requirements.
• The person deliberately made a mistake.
• The person is aware of the inaccuracy at the time of submission but does not inform the authorities.
• Lastly, the person learns about the mistake after SFT filing but fails to inform the authorities and rectify the mistake within 10 days.

Also Read: What is the Penalty for Not Filing the Income Tax Return?

Understanding the applicability of Section 285BA of the Income Tax Act is crucial for individual taxpayers and entities. Section 285BA allows the government to monitor high-value transactions.

Taxpayers need to be aware of the intricacies of statements of financial transactions and reportable accounts to avoid fines and penalties from the authorities. Due diligence can save taxpayers a lot of money.

Additionally, there are plenty of ways to save money when it comes to filing taxes. One such way is to buy a health insurance plan. A premium paid for a medical insurance plan is available for tax deduction under Section 80D of the Income Tax Act, 1961.

The deduction limit is ₹25,000 for individuals below 60 years during the financial year. However, for senior citizens, it is ₹50,000 in a year. When it comes to buying a health insurance plan, TATA AIG offers various plans that are customised based on your unique health needs.

Our affordable and low-premium health insurance plans offer various benefits, such as cashless hospitalisation, tax benefits and more. Investing in our health insurance plan now can help you reduce your tax liability.

Also Read: Section 80D: Deductions for Medical & Health Insurance