Everything About Statement of Financial Transaction Under Section 285BA Explained

SFT full form is a statement of financial transactions, which monitors the high-value transactions by the taxpayer during the financial year. All taxpayers must do SFT reporting for their defined financial transaction by submitting Form 26AS when filing income tax.

The SFT transaction in 26AS specifies all the transactions, such as investments, expenditures and more, beyond taxpayers' decided or threshold limit.

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:

Below are the transactions that need to be reported under SFT income tax.

All the transactions made under a work contract.

A transaction that specifies lending or accepting loans or deposits.

Transaction of expenditure or investment made.

Transaction for rendering service.

Transaction of exchange, sale and purchase of goods and property.

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 to check the monetary threshold, which is ₹10 lakhs, both accounts need to be aggregated.

All the transactions of individuals of the same nature need to be aggregated for the financial year. It means if the person purchased a share of ₹5 lakh in July and then again purchased ₹5 lakh in November of the same year. Then, both transactions need to be aggregated.

For a transaction made under a joint account, the entire transaction value should be aggregated to both the 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 need to be required at the time of SFT filing such as:

Form 61A for other entities.

Form 61B for specified reporting companies or institutions.

Valid PAN card.

Copy of Digital signature.

The documents might vary, so checking the official website before conducting the procedure online is best.

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

Step 1: To initiate the SFT filing process, head to the official website of the income tax portal.

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 the acknowledgement of the same will be received by email and SMS.

Step 8: Once this ITDREIN starts displaying on account, navigate to 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.

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, then they must instantly pay the penalty of ₹1000 per day as per 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 comes to know about the mistake after SFT filing and fails to inform the authority and rectify the mistake within 10 days.

Filing a tax on time is essential, but many a time, we look for options to avail of the tax benefits. The government has offered various tax exemptions by which taxpayers can reduce their tax liability. One such exemption listed under Section 80D of the Income Tax Act, 1961, is the tax deduction advantage on any health insurance plan premium.

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. Other than tax exemption, there are various benefits of health insurance, such as financial protection during a medical emergency, top-notch medical care in a reputed care facility, hospitalisation expenses and more.

Tata AIG offers top-notch medical insurance plans that cater to varied health insurance requirements. Further, we are the health insurance providers with a network of 10,000+ hospitals that offer cashless services nationwide to our policyholders.

The statement of financial transactions helps the government track taxpayers' high-value transactions. It is a great initiative to save the country's economy and curb black money.

However, to make this initiative successful, taxpayers must understand their responsibility by filing the SFT. Failing to do so can invite hefty fines and punishment from the income tax authority.

How much interest income is reported in SFT?

As per the new notification released by CBDT(Central Board of Direct Taxes), account holders getting or earning interest up to ₹5000, except those holding Jan Dhan Account, need to be reported in SFT.

What happens if SFT is not filed?

If the individual or entity fails to file SFT within the due date, then they need to pay a ₹500 fine per day, and a notice will be sent to them with a 30-day extended period to file SFT.

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

If the transaction is beyond the threshold limit decided by the authorities, then SFT reporting is necessary per the rules.