Accumulation of black money has been one of the major threats to the Indian economy. The government of India along with the ministry of finance has been striving towards curbing black money and also widening the tax base and has taken numerous initiatives in this regard.
One such initiative was to cast an obligation on government agencies and other authorities who are a valuable and reliable source of information, 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.
Later, Finance Act 2014 replaced Section 285BA and renamed it as ‘obligation to furnish statement of financial transaction or reportable account’ to widen the scope of specified persons and to introduce various other provisions.
In this article, we have discussed the provisions of Section 285BA and related Rules.
Recent Updates
The income tax department, in Budget 2021, had notified the launch of pre-filled Income tax returns for ease and accuracy of filing. To facilitate this process, CBDT issued a circular on 12th March 2021 by authorising various entities to report capital gains, dividend income and interest income.
Financial transactions specifically required to be reported under Section 285BA are as follows:
Section 285BA authorizes the 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 prescribed by CBDT via Rule 114E is given below:
| SI No | Nature of transaction to be reported | Monetary threshold of transaction | Specified person required to submit SFT |
| 1 | Cash payment purchase of bank drafts or pay orders or banker’s cheque Cash payments for purchase of pre-paid instruments issued by Reserve Bank of India Cash deposits in one or more current account of a person Cash withdrawals from one or more current account of a person | Aggregating to Rs 10 lakh or more in a FY Aggregating to Rs 10 lakh or more during the FY Aggregating to Rs 50 lakh or more in a FY Aggregating to Rs 50 lakh or more in a FY | A banking company or Co-operative bank to which Banking Regulation applies |
| 2 | 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 | A banking company or Co-operative bank to which Banking Regulation applies Post-Master General of post office |
| 3 | 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 | A banking company or Co-operative bank to which Banking Regulation applies Post-Master General of post office Nidhi Company as per Section 406 of the Companies Act, 2013 NBFC – Non banking financial company holding certificate of registration under RBI Act to hold or accept deposit from public |
| 4 | 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 | A banking company or Co-operative bank to which Banking Regulation applies or any other company or institution issuing credit card |
| 5 | Receipt from any person for acquiring bonds or debentures issued by the company or institution (other than renewal) | Aggregating to Rs 10 lakh or more in a FY | A company or institution issuing bonds or debentures |
| 6 | Receipt from any person for acquiring shares (including share application money) issued by the company | Aggregating to Rs 10 lakh or more in a FY | A company issuing shares |
| 7 | Buyback of shares from any person (other than the shares bought in the open market) | Aggregating to Rs 10 lakh or more in a FY | Listed company purchasing its own securities under section 68 of the Companies Act, 2013 |
| 8 | Receipt from any person for acquiring units of one or more schemes of a Mutual Fund (other than transfer from one scheme to another) | Aggregating to Rs 10 lakh or more in a FY | A trustee of a Mutual Fund or any such other person authorised to manage the affairs of the Mutual Fund |
| 9 | 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 or credit card or through issue of travellers cheque or draft or any other instrument | Aggregating to Rs 10 lakh or more during a FY | Authorised person as referred to in Section 2(c) of the Foreign Exchange Management Act, 1999 |
| 10 | Purchase or sale of immovable property | Transaction value or valuation of stamp duty authority referred in Section 50C for an amount of Rs 30 lakhs or more. | Inspector-General appointed under section 3 of the Registration Act, 1908 or Registrar or Sub-Registrar appointed under section 6 of that Act. |
| 11 | Cash receipt for sale, by any person, of goods or services of any nature (other than those specified at Sl. Nos. 1 to 10) | Exceeding Rs 2 lakh | Any person who is liable for audit under section 44AB of the Act |
| 12 | Cash deposits during the period 09th November, 2016 to 30th December, 2016 | Aggregating to Rs 12,50,000 or more in one or more current account of a person or Rs 2,50,000 or more in one or more account (other than current account) of a person | A banking company or Co-operative bank to which Banking Regulation applies Post Master General of post office |
| 13 | Cash deposits during the period 1st of April, 2016 to 9th November, 2016 in respect of accounts that are reportable under Sl.No.12. | A banking company or Co-operative bank to which Banking Regulation applies Post Master General of post office |
As can be seen from the above monetary threshold for specified financial transactions except SI No 10 and 11, aggregation is required to analyze if the monetary threshold is being crossed.
While aggregating the amount, the following shall be noted:
1. All the accounts of the same nature as specified in column (2) of the above Table maintained in respect of that person during the FY shall be taken into account
For example: If Mr A has two savings account of Rs 5 lakh each, in order to check the monetary threshold of Rs 10 lakh, the amount in both savings account needs to be aggregated
2. All the transactions of the same nature as specified in column (2) of the above Table recorded in respect of that person during the FY shall be aggregated
For example: If Mr A has purchased shares for a value of Rs 5 lakhs in September in an FY and Rs 6 lakhs in November of the same FY, the value of both shares need to be aggregated to check the monetary threshold of Rs 10 lakhs
3. In a case where the account is maintained or transaction is recorded in the name of more than one person like a joint account, attribute the entire value of the transaction or the aggregated value of all the transactions to all the persons
For example: In case Mr A and Mr B holds two joint savings account of Rs 3 lakhs and Rs 7 lakhs, aggregation of Rs 10 lakhs is attributed to both Mr A and Mr B separately to check for monetary threshold
SFT shall be submitted either in Form 61A (other reporting entities) or Form 61B (prescribed reporting financial institution). SFT shall be submitted electronically, under the digital signature certificate to the Director of Income-tax (Intelligence and Criminal Investigation) or the Joint Director of Income-tax (Intelligence and Criminal Investigation). A Post Master General or a Registrar or an Inspector General may furnish SFT in a computer-readable media being a Compact Disc or Digital Video Disc (DVD), along with the verification in Form-V on paper. SFT shall be submitted through the following procedure:
In case if the SFT filed is considered to be defective by the concerned income-tax authority, the same shall be intimated to the reporting entity/person by such authority and an opportunity for rectifying the defect within a period of 30 days from the date of such intimation shall be given.
This due date for rectification of default can be extended further by the income tax authority at his discretion on an application made in this behalf.
However, if the defect is not rectified within 30 days or such an extended period, such statement shall be treated as invalid and consequences of non-furnishing of SFT shall apply.
In case of non-furnishing of SFT within due date, the prescribed income-tax authority may serve notice upon such person requiring him to furnish SFT within a period not exceeding 30 days from the date of service of such notice and he shall furnish the statement within the time specified in the notice.
If reporting person does not furnish the SFT within the original due date, a penalty of Rs. 500 per day of default. Further, if no report is furnished even within the extended due date specified in the notice served upon the person, a penalty of Rs 1000 per day will be levied from the day immediately following the day on which the specified time in the notice expires.
Overall, a penalty of Rs 500 per day from the expiry of the original due date till the due date mentioned in the notice and Rs 1,000 per day beyond the due date specified in the notice.
The penalty of Rs 50,000 will be levied on prescribed reporting financial institution if it provides inaccurate information in the statement where: