Order to Cash (OTC/O2C) is a set of various business processes used for receiving/processing cl...
The Income-tax law has structured the concept of statement of financial transaction or reportable account (previously it was called Annual Information Return or AIR) to keep a watch on high-value transactions undertaken by the taxpayer. The tax authorities, with the help of statements, can collect information on certain specified high-value transactions conducted by a person during a year. Specific organisations must file the announcement of financial transactions or reportable accounts. In this statement, they are required to furnish the details of the particular financial transactions or any reportable account registered or recorded or maintained by them during the year. The income tax department keeps track of the specified financial transactions which are carried on by a person during a year. In this article, we will discuss the various provisions relating to the statement of financial transactions or reportable accounts.
According to section 285BA of the Income-tax Act, 1961 substituted by the Finance Act, 2014 with effect from 1 April 2015, the specified entities or Filers are required to furnish a statement of financial transaction or reportable account in respect of some specified transactions or any reportable account registered/ recorded /maintained by them during the financial year to the income-tax authority or such other prescribed authority as suggested.
A specified financial transaction has been classified as follows:
Also, Read: Financial Due Diligence / Accounting Due Diligence.
The following person needs to furnish a statement of financial transaction or reportable accounts registered or recorded and maintained by them during the financial year to the prescribed authority:
According to Section 285BA, the Central Board of Direct Taxes (CBDT) can prescribe different values with respect to different specified financial transactions for different specified persons having regard to the nature of such transactions. It is also prescribed by CBDT via Rule 114E as enumerated below:
|Nature of Transaction||Monetary Limit||Person Required to submit Statement of Financial Transaction|
|Cash payment made for the purchase of bank drafts or pay orders or banker’s cheque||Aggregate to Rs 10 lakh or more in a Financial Year||A banking company or any co-operative bank to which the Banking Regulation Act applies|
|Cash payments for purchasing of pre-paid instruments issued by the Reserve Bank of India (RBI)||Aggregate to Rs 10 lakh or more in a FY||A banking company or any co-operative bank to which the Banking Regulation Act applies.|
|Cash deposits made in one or more current account of a person||Aggregate to Rs 50 lakh or more in a FY||A banking company or any co-operative bank to which the Banking Regulation Act applies|
|Cash withdrawals are made from one or more current account of a person||Aggregate to Rs 50 lakh or more in a FY||A banking company or any co-operative bank to which the Banking Regulation Act applies|
|Cash deposits are done in one or more accounts other than a current account and also time deposit of an individual||Aggregate to Rs. 10 lakh or more in a financial year||A banking company or any Co-operative bank to which the Banking Regulation Act applies, Post-Master General of post office|
|One or more time deposits other than the renewed time deposit of another time deposit of an individual||Aggregate to Rs. 10 lakh or more in a financial year||
according to Section 406 of the Companies Act, 2013|
NBFC holding certificate of registration under the RBI Act and permission to hold or accept deposit from public
|Credit card payments are made by any person either in cash or by other modes in a financial year.||Aggregate to Rs 1 lakh or more in cash or Rs 10 lakh or more by any other mode in a financial year.||A banking company or any Co-operative bank to which the Banking Regulation Act applies or any other company or organization issuing credit card|
|Receipt done from any person for acquiring bonds or debentures issued by the institution or company (other than renewal)||Aggregate to Rs 10 lakh or more in a financial year||A company or institution who issues bonds or debentures|
|Buyback of shares from any individual (other than the shares bought in the open market)||An aggregate amount of Rs 10 lakh or more in a FY||Listed company purchasing its own securities as per section 68 of the Companies Act, 2013|
|The receipt made from any person for acquiring units of one or more schemes of a Mutual Fund||Aggregate of Rs 10 lakh or more during a Financial Year.||A mutual fund trustee or any other person authorised to manage the affairs of the Mutual Fund|
|Receipt from any person for the sale of foreign currency, which includes any credit of the currency to foreign exchange card or expense through a debit card or credit card or through the issue of a traveler’s cheque /draft /another instrument.||Aggregate of Rs 10 lakh or more during a financial year.||Authorised person as mentioned in Section 2(c) of the Foreign Exchange Management Act, 1999|
|Purchase or sale of the immovable property||The transaction value /valuation of stamp duty authority as referred to in Section 50C for an amount of Rs 30 lakhs or more.||An Inspector-General appointed as per section 3 of the Registration Act, 1908 or Registrar or Sub-Registrar appointed under section 6 of that Act.|
|The cash receipt for sale done by any person regarding the goods or services of any nature.||Exceeding Rs 2 lakh||Any person who is liable for an audit according to section 44AB of the Act|
The following listed procedure must be adopted to submit the Statement of Financial Transaction (SFT):
The Statement of Financial Transaction (SFT) must be filed in Form 61A shall be submitted on or before 31 May of the Financial Year, immediately preceding the FY in which the transaction is recorded or registered.
A statement of reportable account is to be submitted in Form 61B shall be submitted by prescribed reporting financial institution for every calendar year on or before 31 May of next year.
In case, if the concerned income tax authority considers the SFT to be defective, they shall be intimated by the reporting entity or person by such authority. The authority shall provide an opportunity to rectify the defect with a time span of 30 days from the date of receiving such intimation. This due date can further be extended for rectification of default by the income tax authority at his discretion on an application made in this behalf. However, if within 30 days the defect is not rectified, such a statement will be treated as invalid, and the consequences of non-filing of SFT shall apply here.
Any individual furnishing SFT, discovers any inaccuracy in the information provided in the statement, he needs to inform the inaccuracy in the statement and must furnish the correct information to the income-tax authority or agency or any specified authority within a time span of 10 days.
A penalty will be charged with amount Rs 50,000 on prescribed reporting financial institution, in case it provides any inaccurate information in the statement where:
The statement of financial transactions is submitted to check the accuracy of the transactions done. By filing form 61A, a person can declare that the money he owns is not black money. The Ministry of Finance has been working along with the Government of India to curb down the black money and also to widen the tax base. It has introduced various initiatives in this regard. One such initiative is to cast an obligation on the Government agency and also other authorities to provide a reliable source of information to report the high-value transactions. The specified persons were required to submit the Annual Information Return (AIR) introduced in 2003 with respect to specified transactions under section 285BA.
See Our Recommendation: Corporate Compliance Calendar For April 2020.