Insight into Statement of Financial Transactions for Interest Income: Significance, submission process, and impact on tax compliance. Get to know more about it
Overview of Statement of Financial Transactions (SFT)
Form 61A, as required by Rule 114E of the Income-tax Department, serves as a Statement of Financial Transactions (SFT). This form acts as a comprehensive reporting mechanism for entities conducting specified foreign transactions. It provides detailed information on transactions exceeding designated thresholds, ensuring transparency and compliance with relevant provisions. By capturing data on various sections and types of transactions, the SFT empowers the department to gain a clear picture of entities’ global financial activities. So, the SFT acts as a crucial tool for both entities, in fulfilling their reporting obligations, and for the department, in monitoring cross-border transactions and potential tax implications
Statement of Financial Transactions (SFT) for Interest Income
- Represents earnings generated from investments, loans, or deposits
- Includes interest from savings accounts, bonds, certificates of deposit (CDs), and other financial instruments
- Recorded as revenue when earned, not necessarily received, based on accrual accounting principles
- Listed under operating or non-operating income on the income statement, depending on the entity’s primary activities
- A key component contributing to a company’s overall revenue and profitability.
Prescribed Date for Submission of SFT
- Generally due on or before May 31 of the assessment year following the financial year in which the specified financial transactions occur
- Certain transactions might have different due dates specified by tax authorities
- Submission is typically done electronically through the designated portal or platform
- Some jurisdictions allow for extensions under specific circumstances, but these are subject to conditions and approvals
- Late submission can result in penalties or fines imposed by tax authorities, emphasizing the importance of meeting the deadline.
Eligibility to Furnish SFT for Interest Income
- Usually applicable when the aggregate interest income exceeds a specified threshold during a financial year
- Banks, financial institutions, businesses, and individuals engaged in financial activities meeting the criteria set by tax authorities
- Covers interest income from various sources like savings accounts, fixed deposits, bonds, and other interest-bearing financial instruments
- Compliance mandated by tax authorities within a particular jurisdiction
- Certain categories or entities might be exempted based on specific regulations or income thresholds set by authorities.
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New Registration of Statement of Financial Transactions
Step 1: Access Portal
Log in to the designated government portal for filing statements.
Step 2: Select Statement Type
Choose the relevant statement type (like Form 61A for specified transactions).
Step 3: Enter Detail
Input accurate transaction details, including PAN/TAN of parties, transaction amount, nature, date, etc.
Step 4: Verify Information
Double-check entered data for precision and correctness
Step 5: Upload Documents
Attach supporting documents if required, ensuring they meet specified formats
Step 6: Review and Submit
Review all information before submission to ensure accuracy
Step 7: Confirmation and Acknowledgment
Await confirmation or acknowledgment of successful submission
Step 8: Record Transaction ID
Note down the transaction ID or reference number for future tracking.
Guidelines for Preparation of Statement of Financial Transactions
- Gather precise details like PAN/TAN, transaction date, amount, nature, etc
- Ensure all supporting documents align with specified formats and are readily available
- Categorise transactions accurately based on guidelines for various types of SFTs
- Verify data for accuracy before submission
- Adhere to the stipulated deadlines for filing statement of financial transactions
- Understand and use the designated government portal proficiently for submission
- Safeguard sensitive information while compiling and submitting the statement
- Review the prepared statement before final submission to ensure compliance with regulatory norms.
Aggregation Rule for Statement of Financial Transactions
- Aggregate transactions meeting specified thresholds, typically for PAN or TAN holders
- Combine similar transactions falling under the same nature or category for aggregation
- Aggregate transactions across various entities associated with the same PAN or TAN
- Combine transactions occurring within a defined period, often a financial year, for reporting purposes
- Merge transactions of related entities or individuals linked by specific criteria, such as joint accounts or partnerships
- Exclude certain transactions based on predefined exceptions outlined by regulatory guidelines
- Ensure precise summation and aggregation of relevant transactions according to established norms.
Due Date of Furnishing Statement of Financial Transactions
The Statement of Financial Transactions must be furnished by May 31 of the succeeding year for each financial year with transactions. Missing this deadline incurs an initial penalty of ₹500 per day. After a notice is issued by authorities, the form must be submitted within 30 days. Failure to comply results in a ₹1000 per day penalty from the notice’s deadline.
Procedure for Submission of Statement of Financial Transaction
- Step 1: Gather all relevant financial transaction details
- Step 2: Log in to the designated portal for filing
- Step 3: Select the appropriate form for Statement of Financial Transactions
- Step 4: Fill in transaction specifics accurately
- Step 5: Review all entered data for correctness
- Step 6: Upload or input the finalised form
- Step 7: Await confirmation of successful submission
- Step 8: Keep a record of the acknowledgment or reference number
- Step 9: Ensure compliance with due date and regulations
- Step 10: Address any notices or queries promptly if received.
Frequently Asked Questions
Who needs to file SFT?
Entities like banks, financial institutions, and businesses engaged in specified high-value transactions are required to file Statement of Financial Transactions (SFT) to tax authorities.
What are the 4 financial transactions?
The four main financial transactions include cash deposits, property purchases, credit card payments, and mutual fund investments, exceeding specified thresholds as per tax regulations.
What is the penalty for SFT?
For failure to submit the Statement of Financial Transactions within the due date, a penalty of ₹500 per day initially and Rs 1000 per day upon continued default may be imposed.
What is the interest income limit for SFT?
The interest income limit for filing SFT is set at Rs 10,000 or more in a financial year for individuals, HUFs, and entities required to furnish these details.
Who is required to file SFT Form 61A?
Entities such as banks, financial institutions, and certain specified persons conducting high-value transactions, as mandated by the Income Tax Act, are obliged to file SFT Form 61A to report these transactions to tax authorities.
