Submission of Statement of Financial Transaction (SFT) for Interest Income.
Statement of Financial Transactions or SFT refers to information related to certain high-value transactions which specified persons are required to report to the income tax department. The SFT was earlier known as ‘Annual Information Return (AIR)’. The objective of SFT was to curb black money and widening the tax base.
Class of person required to furnish SFT on interest income
- A Banking company or a Co-op. Bank to which the Banking Regulation Act, 1949 (10 of 1949) applies (including any bank or banking institution referred to in section 51 of that Act);
- Post Master General as referred to in section 2(j) of the Indian Post Office Act, 1898;
- Non-banking financial company which holds a certificate of registration under section 45-IA of the Reserve Bank of India Act, 1934 (2 of 1934), to hold or accept deposit from public.
Guidelines for preparation of SFT
- Interest income refers to interest paid/credited during the financial year.
- Interest income to be reported for all account/deposit holders where cumulative interest exceeds Rs 5,000 per person in the financial year.
- Interest which is exempt from tax under the Income tax Act, 1961 such as interest on Public Provident Fund (PPF) Account, Foreign Currency Non-resident (FCNR) Account, Sukanya Samriddhi Account, Resident Foreign Currency Account etc. need not be reported.
- While reporting the interest amount, deduction of Rs. 10,000/-available under section 80TTA should not be reduced from interest amount paid/credited.
- In case of joint account, the interest paid/credited should be assigned to the first/primary account holder or specified assigned person as per Form 37BA.
- In case of minor being the account holder, the information to be reported in the name of Legal Guardian.
- Separate report is required to be submitted for each account type (i.e., Savings, Time Deposit, Recurring Deposit, Others) and Interest on same account type is required to be aggregated in the report.
Due date for furnishing SFT
SFT in Form 61A shall be submitted on or before 31st May of the FY, immediately following the FY in which the transaction is recorded or registered.
What is the remedy available if there is defect in the SFT submitted?
In case if the SFT filed is considered to be defective by the concerned income-tax authority, 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.
However, if defect is not rectified within 30 days or such extended period, such statement shall be treated as invalid and consequences of non-furnishing of SFT shall apply.
Failure to Furnish SFT
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 original due date, 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, 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, penalty of Rs 500 per day from the expiry of original due date till due date mentioned in the notice and Rs 1,000 per day beyond the due date specified in the notice.
Inaccurate Information SFT
If any person who has furnished SFT, comes to know or discovers any inaccuracy in the information provided in the statement, he shall inform the inaccuracy in such statement and furnish the correct information to the income-tax authority or specified authority or agency within 10 days.
Special provision for penalty in case of prescribed reporting financial institution
Penalty of Rs 50,000 will be levied on prescribed reporting financial institution if it provides inaccurate information in the statement where:
- Inaccuracy is due to a failure to comply with the prescribed due diligence requirement or is deliberate on the part of that person; or
- The person knows of the inaccuracy at the time of furnishing the statement of financial transaction or reportable account, but does not inform the prescribed income-tax authority or such other authority or agency; or
- The person discovers the inaccuracy after the statement of financial transaction or reportable account is furnished and fails to inform and furnish correct information within 10 days as mentioned above.
Penalty for failure to furnish SFT
In case an assessee fails to furnish SFT, he shall be liable for payment of penalty as follows:
Impact of Provisions
- Companies paying interest other reporting persons enlisted above shall have to ensure compliance and reporting requirement.
- Based on the SFT, the Income Tax Returns of the recipients, shall be pre-filled with the amount of interest income
Pre-filling of Income Tax Return Forms, based on information obtained from SFT, shall discourage the taxpayers from suppressing information about their financial transactions from tax authorities and resultantly, shall help widen the tax base. Simultaneously, it shall facilitate the taxpayers to verify such details with the information available on records, while filing the Income Tax Returns
Disclaimer:“Information contained herein is for informational purposes only and should not be used in deciding any particular case. The entire contents of this document have been prepared on the basis of relevant provisions and as per the information existing at the time of the preparation. Though utmost efforts have been made to provide authentic information, it is suggested that to have better understanding and obtaining professional advice after thorough examination of particular situation.”
Pavan Kumar S