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If you engage in large financial transactions, chances are that the details are being automatically reported to the Income Tax Department through the Statement of Financial Transaction (SFT) mechanism, even if you do not directly disclose them in your income tax return (ITR). Such large financial transactions can be- cash withdrawals, cash deposits, sale of immovable property, payment in cash, investment in time deposit, buyback of shares, etc.
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Here we take you through large financial transactions that specified entities report to the Income Tax Department (as per the Income Tax Department website).
16 large financial transactions
| Nature of Transaction | Value of Transaction (Threshold) | Reporting Person / Specified Person | |
| 1 | Cash payment for purchase of bank drafts, pay orders or banker’s cheques | Aggregate payment of ₹10 lakh or more in a financial year | Bank or Co-operative Bank |
| 2 | Cash payment for purchase of pre-paid instruments issued by RBI | Aggregate payment of ₹10 lakh or more in a financial year | Bank or Co-operative Bank |
| 3 | Cash deposits in one or more current accounts of a person | Aggregate amount of ₹50 lakh or more in a financial year | Bank or Co-operative Bank |
| 4 | Cash withdrawals (including through bearer’s cheque) from one or more current accounts of a person | Aggregate amount of ₹50 lakh or more in a financial year | Bank or Co-operative Bank |
| 5 | Cash deposits in one or more accounts other than current account and time deposit | Aggregate amount of ₹10 lakh or more in a financial year | Bank / Co-operative Bank / Post Master General |
| 6 | Receipt of cash payment for sale of goods or services (other than those specifically reportable) | More than ₹2 lakh per transaction | Any person liable for tax audit under Section 44AB |
| 7 | Payment in cash for one or more credit cards | Aggregate payment of ₹1 lakh or more in a financial year | Bank / Co-operative Bank / Credit card issuing company |
| 8 | Payment by any mode other than cash for credit cards | Aggregate payment of ₹10 lakh or more in a financial year | Bank / Co-operative Bank / Credit card issuing company |
| 9 | One or more time deposits (excluding renewals) | Aggregate amount of ₹10 lakh or more in a financial year | Bank / Co-operative Bank / Post Master General / Nidhi Company / NBFC |
| 10 | Receipt for acquiring bonds or debentures | Aggregate amount of ₹10 lakh or more in a financial year | Company or institution issuing bonds or debentures |
| 11 | Receipt for acquiring shares (including application money) | Aggregate amount of ₹10 lakh or more in a financial year | Company issuing shares |
| 12 | Buyback of shares (other than open market purchases) | Aggregate amount of ₹10 lakh or more in a financial year | Listed company purchasing its own securities |
| 13 | Receipt for acquiring mutual fund units | Aggregate amount of ₹10 lakh or more in a financial year | Trustee or authorised person managing Mutual Fund |
| 14 | Purchase or sale of immovable property | Transaction value or stamp valuation of ₹30 lakh or more | Inspector-General / Registrar / Sub-Registrar |
| 15 | Receipt for sale of foreign currency or forex card credit | Aggregate amount of ₹10 lakh or more in a financial year | Authorised Dealer / Money Changer / Offshore Banking Unit |
| 16 | Expense in foreign currency using debit/credit card, traveller’s cheque, draft or any other instrument | Aggregate amount of ₹10 lakh or more in a financial year | Authorised Dealer / Money Changer / Offshore Banking Unit |
What is SFT?
SFT provides a reporting mechanism wherein specified entities are required to provide information about material financial transactions to the Income Tax Department. This statement is filed annually on or before May 31 immediately following the financial year in which a transaction has been registered or recorded.
However, SFT in relation to transactions in listed securities and units of mutual funds is required to be filed on a half-yearly basis.
The following transactions are reported in SFT by the specified persons:
a) High-value transactions;
b) Payment of dividend
c) Payment of interest; and
d) Transactions in listed securities and units of mutual funds.
While aggregating the amount for determining the thresholds for reporting in respect of any person (except for the sale or purchase of immovable property and cash transactions for the sale of goods or services in excess of Rs 2 lakh), the reporting person shall consider the following:
a) Take into account all accounts of the same nature maintained in respect of that person during the financial year.
b) Aggregate all transactions of the same nature as recorded in respect of that person during the financial year.
c) Attribute the entire value of a transaction or aggregated value of all transactions to all the persons, in a case where the account is maintained or the transaction is recorded in the name of more than one person.
d) Apply the threshold limit separately to cash deposits and cash withdrawals (including through bearer’s cheque) in or from one or more current accounts of a person.
How to file SFT
The Statement of Financial Transaction, in respect of a financial year, should be furnished electronically under the digital signature of the person responsible for the verification of the statement in Form 61A.
Due date to furnish SFT
SFT shall be furnished on or before May 31, immediately following the financial year in which the transaction has been registered or recorded.
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