1. Background:
  • Accumulation of black money has been one of the major threats to the Indian economy. The GOI along with the Ministry of Finance has been striving towards curbing black money and also widening the tax base.
  • One such initiative was to cast an obligation on the Government agencies and other authorities 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 of the Income Tax Act, 1961.
  • Later,Finance Act 2014 replaced Section 285BA and renamed AIR as “Statement of Financial Transactions or Reportable Accounts” to widen the scope of specified persons and to introduce various other provisions.
  1. Meaning:
  • It is a report of specified financial transactions by specified persons.
  • Financial transactions specifically required to be reported under Section 285BAare as follows:
  • 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
  1. The Financial Transactions:
  • Section 285BAauthorizes Central Board of Direct Taxes (CBDT) to prescribe different values with respect to different specified financial transactions in respect of different specified persons having regard to the nature of such transactions. The same have been prescribed by CBDT via Rule 114E.
  • Among the 13 SFT’s prescribed, the following are ones that are to be reported by banks (to which the Banking Regulation Act, 1949 applies):

 

Sr. No Nature of SFT to be reported Threshold*
1 Cash payment purchase of bank drafts or pay orders or banker’s cheque Aggregating to Rs 10 lakh or more in a FY
2 Cash payments for purchase of pre-paid instruments issued by Reserve Bank of India Aggregating to Rs 10 lakh or more during the FY
3 Cash deposits in one or more current account of a person Aggregating to Rs 50 lakh or more in a FY
4 Cash withdrawals from one or more current account of a person Aggregating to Rs 50 lakh or more in a FY
5 Cash deposits in one or more accounts other than a current account and time deposit of a person Aggregating to Rs 10 lakh or more in a FY
6 One or more-time deposits (other than renewed time deposit of another time deposit) of a person Aggregating to Rs 10 lakh or more in a FY
7 Credit card payments made by any person either in cash or by any other mode in a FY. Aggregating to Rs. 1 lakh or more in cash or Rs. 10 lakh or more by any other mode in a FY

*The threshold limits are to be checked based on the aggregate of all transactions.

**The most common transactions have been highlighted in yellow.

  1. Filing of SFT Report
  • SFT shall be submitted in Form 61Aelectronically, under DSC to the Director of Income-tax (Intelligence and Criminal Investigation) or the Joint Director of Income-tax (Intelligence and Criminal Investigation)
  • SFT in Form 61A shall be submitted on or before 31st Mayof the FY, immediately following the FY in which the transaction is recorded or registered.
  • A separate form is to be filed for each such transaction type.
  1. SFT in Form 26AS
  • From the Assessment Year 2020-21 (FY 2019-20), the Form 26AS would reflect the details of SFTs.
  • The Income Tax Department vide Press release dated 07.2020informed that ‘the information being received by the Income Tax Department from the filers of these specified SFTs is now being shown in Part E of Form 26AS to facilitate voluntary compliance.
  1. In the case of Mr. Rajiv Misra
  • Part E of Form 26AS provides the details of the SFT as below:
  1. Type of transaction: SFT-005
  2. Name of SFT Filer: SBI, Mumbai
  • Single/Joint Party Transaction: Single
  1. No: of parties: 1
  2. Amount: 7,98,000
  • As per Notification No. 3 of 2018dated 5th April 2018, the transaction type SFT-005 has been further explained in Annexure C:
  • Therefore SFT-005 represents one or more-time deposits(other than a renewed time deposit) of a person for an amount aggregating to INR 10 Lakhs or more in a FY. The reporting entity in this case is a banking company to which the Banking Regulation Act, 1949 applies.
  1. Issue Involved
  • As mentioned above, SFT-005 is only applicable when aggregate of time deposits in a FY is >=INR 10 Lakhs.
  • However, in this case, the amount as reported by SBI is only INR 7,98,000for FY 2019-20 which is below INR 10 Lakhs.
  • In the Form 26 AS, there are several interest credits shown, from which it can be inferred that the assessee has Banking Deposits with State Bank of India, in excess of Rs 10 Lakhs. The question is why has this SFT which has been reported by SBI through Form 61A showing only an amount Rs 7,98,000/-. This could be a reporting error.
  • We would advise that the assessee should obtain Interest Certificates for the FY 19-20 from the Banks where he has deposits. The higher of the interest figure appearing in the 26AS or the Interest Certificates issued by the Banks, should be shown as interest income, while filing the Income Tax Return. If the 26AS figure is substantially higher, then clarification should be sought from the concerned Bank regarding the variance, before filing the Tax Return.