SFT is also known as Special Financial Transaction which is a report of specified financial transactions by specified persons including prescribed reporting financial institution. Such specified persons who register, maintain such specified financial transaction are under a mandate to submit SFT to the income tax authority or such other specified authority or agency.
Income Tax Department is broadening its scope of disclosers and reporting day by day, there are some type of transactions on which Income Tax Department is very aggressive these days, and if any person entered in such transaction without any valid source then he/she can be caught in big difficulties in future. In the Income Tax Act perspective, these transactions are known as Special Financial Transaction (SFT Reporting)
So, an individual must be very careful while entering into such type of transactions. Government has put the obligation on the banks, property registrar etc. to report such transactions to the Income Tax Authorized along with the details of person carried out these transactions, e.g. if a person buys an Immovable property for INR 30 Lac or more then it is the duty of registrar to provide the details of this transaction to the Income Tax Department along with details PAN No. and property’s value and the moment this information comes to the Income Tax Department, they show this transaction in to the Form 26AS of buyer and waits the buyer’s ITR that what treatment he/she will give in his/her ITR, and if the department satisfied with the treatment given in the Income Tax Return then it will fine with them otherwise they can send notice and ask the complete details regarding the transaction.
Below are some codes and the parameters on which SFT reporting will be given to the Income Tax Department by the respective authorities:
Code Description & Parameters are as follow:
SFT-001: Payment made in cash for purchase of bank drafts or pay orders or banker’s cheque of an amount aggregating to INR 10 lacs or more in a FY.
SFT-002: Payments made in cash aggregating to INR 10 lacs or more during the financial year for purchase of pre-paid instruments issued by RBI (Reserve Bank of India) under the Payment and Settlement Systems Act, 2007- section 18 (51 of 2007).
SFT-003A: Cash deposits aggregating to INR 50 lacs or more in a financial year, in or from one or more current account of a person.
SFT-003B: Cash withdrawals (including through bearer’s cheque) aggregating to INR 50 lac or more in a financial year, in or from one or more current account of a person.
SFT-004: Cash deposits aggregating to INR 10 lacs or more in a financial year, in one or more accounts (other than a current account and time deposit) of a person.
SFT-005: One or more-time deposits (other than a time deposit made through renewal of another time deposit) of a person aggregating to INR 10 lacs or more in a financial year of a person.
SFT-006: Payments made by any person of an amount aggregating to (i) INR 1 lac or more in cash; or (ii) INR 10 lacs or more by any other mode, in a financial year, against bills raised in respect of one or more CC(credit cards)issued to that person.
SFT-007: Receipt from any person of an amount aggregating to INR 10 lacs or more in a financial year for acquiring bonds or debentures issued by the company or institution (other than the amount received on account of renewal of the bond or debt. issued by that company).
SFT-008: Receipt from any person of an amount aggregating to INR 10 lacs or more in a financial year for acquiring shares (including share application money) issued by the company.
SFT-009: Buy back of shares from any person (other than the shares bought in the open market) for an amount or value aggregating to INR 10 lacs or more in a financial year.
SFT-010: Receipt from any person of an amount aggregating to INR 10 lacs or more in a financial year for acquiring units of one or more schemes of a Mutual Fund(MF) (other than the amount received on account of transfer from one to another scheme of that MF).
SFT-011: Receipt from any person for sale of foreign currency including any credit of such currency to foreign exchange card or expense in such currency through a debit card or credit card or through issue of traveller’s cheque or draft or any other instrument of an amount aggregating to INR 10 lacs or more during a financial year.
SFT-012: Purchase or sale by any person of immovable property for an amount of INR 30 lacs or more or valued by the stamp valuation authority referred to in section 50C of the Act at INR 30 lacs or more.
SFT-013: Receipt of cash payment exceeding INR 2 lacs for sale, by any person, of goods or services of any nature (other than those specified at Sl. Nos. 1 to 10 of Rule 114E)
SFT-014: Cash deposits during the period 09th November, 2016 to 30th December, 2016 aggregating to (i) 12 lacs fifty thousand rupees or more, in one or more current account of a person; or (ii) INR 250000 or more, in one or more accounts (other than a current account) of a person. Cash deposits during the period 1st April, 2016 – 9th November, 2016 in respect of accounts that are reportable.
Therefore, if an individual is planning to enter any of the above transactions then be very careful regarding the Income tax Impact, he/she will bear.