CBDT mandates SFTs for dividend income in India. Submit by May 31st yearly. Streamline tax reporting & compliance.

Responding to a need for better tax tracking, the Central Board of Direct Taxes (CBDT) implemented a new ‘Statement of Financial Transactions’ (SFT) system in 2021. Companies must now submit these SFTs, detailing their dividend income transactions, by May 31st of the following year.

Statement of Financial Translations (SFT) – An Overview

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.

What does the Statement of Financial Translations report?

The SFT captures details of various high-value financial transactions, including:

• Purchase or sale of immovable property (land, buildings, etc.)
• Cash deposits exceeding a certain threshold in bank accounts
• Investments in mutual funds, bonds, and other financial instruments
• Foreign currency transactions exceeding a specified limit

Who needs to file an Statement of Financial Translations?

The SFT filing requirement applies to a wide range of individuals and entities, including:

• Individuals with high-value financial transactions
• Companies and businesses
• Trusts and partnerships
• High-income earners

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.

Filing procedures

The SFT is filed electronically through the Income Tax e-filing portal. The specific forms and deadlines for filing vary depending on the type of transaction and the entity filing the SFT.

The SFT is a powerful tool in the fight against financial crime and tax evasion. By providing a clear picture of financial transactions, it helps to ensure a fairer and more transparent tax system in India.

Date for Submission of Statement of Financial Transactions for Dividend income

The deadline for submitting Statement of Financial Transactions (SFT) for dividend income in India is May 31st of the year following the financial year in which the transactions occurred.

This means if you received dividend income in the financial year 2023-24 (from April 1, 2023 to March 31, 2024), you would need to submit the SFT for those dividends by May 31st, 2025.

Statement of Financial Translations for Dividend income Eligibility

When it comes to Statement of Financial Transactions (SFT) for Dividend income in India, eligibility is determined primarily by two factors:

Transaction Amount:

• The SFT requirement applies only to dividend income exceeding a specific threshold. As of October 2023, this threshold is Rs. 10 lakh (1 million rupees) in a financial year.
• If your total dividend income for the year falls below this threshold, you are not obligated to submit an SFT.

Company Type:

• The SFT requirement also applies differently depending on the type of company paying the dividend:
  • Listed companies: Any dividend income received from a company listed on a recognized stock exchange in India triggers the SFT requirement if it exceeds the aforementioned threshold.
  • Unlisted companies: For dividends from unlisted companies, the SFT requirement applies only if the transaction amount exceeds Rs. 10 lakh and the recipient holds shares of the company with a fair market value exceeding Rs. 50 lakh.

Therefore, to determine your SFT eligibility for dividend income, consider both the total transaction amount and the company type. If you exceed both thresholds, you must file an SFT for that particular dividend income.

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Guidelines for Preparation of Statement of Financial Transactions (SFT) for Dividend Income

Guidelines for Preparing SFT for Dividend Income:

Data and Information:

• Company Information: Name, PAN, address of the company paying the dividend.
• Dividend Information: Date of declaration, total amount distributed, amount distributed to each shareholder exceeding Rs. 10 lakhs.
• Shareholder Information: Name, PAN, address of each shareholder receiving dividend exceeding Rs. 10 lakhs (fair market value of shares exceeding Rs. 50 lakhs for unlisted companies).
• Transaction Details: Amount of dividend received by each eligible shareholder, transaction date.

Format and Documentation:

• File in electronic format (Form 61A) through the designated portal (https://www.incometax.gov.in/iec/foportal/).
• Use digital signatures for authentication.
• Maintain supporting documents like dividend statements, shareholding proof.

Procedure for Submission of SFT on Reporting Portal

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.

Track Status:

• Monitor the processing status of your SFT through the portal’s “Track Status” feature.

FAQ’s

Other Important Topics:

• Why We Need Form 61A?
• Income Tax Reporting Portal Forms Type, and Registration