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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.
Table of Contents
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:
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.
Deepti is a Law graduate with an avid interest in reading and very proficient in summarizing legal cases. She has enough experience in handling legal affairs of the company. In the initial days of her career, she has worked as a legal researcher and has 3+ years of experience.
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