Statement of Financial Transactions (SFT) for Dividend income

Statement of Financial Transactions (SFT) for Dividend income

The Statement of Financial Translations (SFT), formerly known as Annual Information Return (AIR), is a crucial tool in India’s fight against tax evasion and black money. It acts as a window into the financial activities of individuals and entities, revealing previously hidden transactions and ensuring transparency in the financial system.

Statement of Financial Transactions (SFT) for Dividend income

What is a Statement of Financial Transaction (SFT)?

Filers must provide a statement of financial transaction or reportable account for their defined financial transactions. Such information reported will be reflected in the AIS – Annual Information statement of the taxpayer. This helps the taxpayer identify all the transactions reported to the income tax department and file their ITR accurately. 

What is Form 61A of Income Tax Act?

Form 61A is the form in which the details of specified financial transactions are to be filed under section 285BA of the Income Tax Act, 1961, read with Rule 114E of the Income Tax Rules, 1962.

Form 61A is used to report all the Specified Financial Transactions to the Income Tax Department. This helps the tax department to identify high-value transactions and compare them with the income reported by such persons(that are executing such high-value transactions) in their income tax returns. The tax department sends notices to such persons if there is a mismatch. Thus, it helps in avoiding tax evasion.

In simple words, Form 61A acts as a bridge between the Income Tax Department and reporting entities, providing transparency and enabling the department to identify discrepancies between reported income and high-value transactions.

Who must file Form 61A?

The following persons/entities are required to file SFT when they enter into specified transactions as discussed below –

  • Person liable for audit u/s 44AB of the Income Tax Act
  • Banking Company
  • Co-operative Bank
  • Post Master General of Post Office
  • Nidhi Company referred u/s 406 of the Companies Act 2013
  • NBFC(Non-banking Financial Company)
  • Company or Institution issuing bonds or debentures
  • Company issuing shares
  • Listed Company (listed on a recognized stock exchange) purchasing its own securities u/s 68 of Companies Act 2013
  • Trustee of a Mutual Fund or such other person managing the affairs of the MF
  • Authorized Person under FEMA(Dealer, Money Changer, Off-shore Banking Unit, or any other person defined in FEMA, 1999)
  • Inspector-General/Registrar/ Sub-Registrar appointed under Registration Act, 1908
  • A banking company, a bank, or any other company or institution issuing a credit card

Nature, Value and Person Responsible to Report a Specified Transaction

Section 285BA authorises 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,

Aggregating to Rs.10 lakh or more in an FY

A banking company or co-operative bank to which the banking regulation applies.

  • Cash payments for the purchase of pre-paid instruments issued by the Reserve Bank of India,

Aggregating to Rs.10 lakh or more during the FY, 

  • Cash deposits or withdrawals from one or more current accounts of a person

Aggregating to Rs.50 lakh  or more in an FY

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 an FY

  • A banking company or co-operative bank to which the banking regulation applies,
  • Post-Master General of a 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 an FY

  • A banking company or co-operative bank to which the banking regulation applies,
  • Post-Master General of a post office, 
  • Nidhi Company as per Section 406 of the Companies Act, 2013,
  •  NBFC – Non-banking financial company holding a 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 an 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 an 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 an 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 an 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 an 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 a foreign exchange card or expense in such currency through a debit or credit card or through the issue of travellers cheque or draft or any other instrument

Aggregating to Rs.10 lakh or more during an 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 lakh 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

Benefits of the Statement of Financial Translations

  • Tax compliance: The SFT helps taxpayers remain compliant with tax regulations by providing a clear record of their financial activities.
  • Curbing tax evasion: The SFT makes it difficult for individuals and entities to hide income and avoid paying taxes.
  • Improving transparency: The SFT promotes transparency in the financial system, making it easier for authorities to track financial activity and identify potential wrongdoing.
  • Widening the tax base: The SFT helps to broaden the tax base by bringing more individuals and entities into the tax net.

Forms to be Used for Furnishing SFT and the Procedure to Submit SFT

Registration and Login:

  • Visit the Income Tax Department’s Reporting Portal: https://report.insight.gov.in/
  • Register for an account using your PAN, TAN, or DSC (Digital Signature Certificate).
  • If already registered, log in with your credentials.

Select Form and Reporting Entity:

  • Choose “Form 61A – Statement of Financial Transactions (SFT)” for dividend income.
  • Select the appropriate reporting entity (usually the company paying the dividend).

Fill in the Form:

  • Provide mandatory information as required in Form 61A, including:
    • Company details
    • Dividend details
    • Shareholder information
    • Transaction details
  • Ensure accuracy and completeness of data.

Upload Documents (if applicable):

  • If required, upload supporting documents like dividend statements or shareholding records.

Digitally Sign:

  • Use your DSC or Electronic Verification Code (EVC) to authenticate and digitally sign the SFT.

Submit Form:

  • Click the “Submit” button to electronically transmit the SFT to the Income Tax Department.

Generate Acknowledgement:

    • Download and save the acknowledgement receipt as proof of submission.

FAQs

Is SFT filing mandatory?

Yes, SFT filing is mandatory for:
* Companies and entities responsible for paying dividends exceeding the thresholds mentioned above.
* Individuals receiving dividends that trigger the SFT requirement.

How do I file dividend income in the reporting portal?

You don’t directly file SFT for your dividend income. The information regarding your dividends will be pre-filled in your income tax return based on the SFT filed by the company.
* However, it’s important to ensure the accuracy of the pre-filled information and update it if necessary.
* Register and login to the Income Tax Department Reporting Portal
* Choose Form 61A – Statement of Financial Transactions (SFT) for dividend income.
* Fill in the form with details about the company, dividends, shareholders, and transactions.
* Upload supporting documents if needed. Digitally sign and submit the SFT.