Introduction
Every year, banks, post offices, mutual funds, registrars, and several other institutions are required to submit Specified Financial Transactions (SFT) reports to the Income Tax Department. These reports capture high-value financial transactions linked to your PAN.
If your ITR (Income Tax Return) does not reflect transactions reported in SFT, it may lead to scrutiny, penalties, or even prosecution. Understanding which transactions are reported under SFT helps you file accurate returns and stay compliant.
Why SFT Reporting Matters
Suppose your annual income is ₹2 lakh, but your AIS (Annual Information Statement) shows that you purchased gold worth ₹14 lakh. While buying gold is legal, such a mismatch raises a red flag.
Real-life examples shared by experts:
- A salaried employee forgot to report ₹25,000 savings bank interest. The bank reported it under SFT, leading to reassessment, penalties, and additional tax liability.
- A businessman sold land but did not report capital gains. The Sub-Registrar reported the sale, resulting in reassessment, heavy penalties, and threat of prosecution.
👉 Lesson: Always cross-check your AIS while filing ITR.
16 Reportable Transactions under SFT (with Thresholds)
The following table shows 16 financial transactions that get reported to the Income Tax Department.
| No. | Nature of Transaction | Threshold / Criteria | Reporting Entity |
|---|---|---|---|
| 1 | Cash payments for bank drafts, pay orders, banker’s cheques | ₹10 lakh+ | Bank |
| 2 | Cash purchase of prepaid RBI instruments | ₹10 lakh+ | Bank |
| 3 | Cash deposits in current accounts | ₹50 lakh+ | Bank |
| 4 | Cash withdrawals from current accounts (incl. bearer cheques) | ₹50 lakh+ | Bank |
| 5 | Cash deposits in savings/non-time deposit accounts | ₹10 lakh+ | Bank/Post Office |
| 6 | Cash received for sale of goods/services (other than already reported SFT cases) | ₹2 lakh+ | Persons liable for Tax Audit |
| 7 | Cash payment towards credit card bills | ₹1 lakh+ | Bank/Credit Card Company |
| 8 | Payment by any mode (non-cash) towards credit card bills | ₹10 lakh+ | Bank/Credit Card Company |
| 9 | Investment in time deposits (other than renewals) | ₹10 lakh+ | Bank/Post Office/NBFC |
| 10 | Receipt for bonds/debentures subscription (other than renewals) | ₹10 lakh+ | Issuing Company |
| 11 | Subscription to shares (incl. application money) | ₹10 lakh+ | Issuing Company |
| 12 | Buyback of shares (not via open market) | ₹10 lakh+ | Listed Company |
| 13 | Purchase of mutual fund units (excluding intra-scheme switches) | ₹10 lakh+ | Mutual Fund Company/Trustee |
| 14 | Sale or purchase of immovable property | ₹30 lakh+ | Sub-Registrar |
| 15 | Purchase of foreign currency / credit to forex card | ₹10 lakh+ | Authorized Dealer, Money Changer, etc. |
| 16 | Foreign currency expenses via debit/credit card or instruments | ₹10 lakh+ | Authorized Dealer/Money Changer |
📌 Deadline: SFT returns are filed by 31st May following the financial year.
What Happens If You Don’t Report SFT Transactions?
Failure to correctly disclose these transactions in your ITR can have serious consequences:
- Tax Notices:
Mismatches between your ITR and AIS may trigger a notice. You may need to file a revised ITR or ITR-U. - Scrutiny & Reassessment:
If no ITR is filed despite high-value SFT entries, the department can open reassessment proceedings. - Penalties:
- Underreporting → Penalty of 50% of tax payable.
- Misreporting → Penalty of 200% of tax payable.
- Prosecution:
- For tax evasion over ₹25 lakh → Jail from 6 months to 7 years, plus fine.
- For smaller evasion cases → Jail from 3 months to 2 years, plus fine.
👉 In some cases, the Income Tax Department may allow compounding (settlement of offense) based on severity.
Key Takeaways for Taxpayers
- Always cross-check your AIS before filing ITR.
- Report all high-value transactions, even if exempt from tax.
- If you miss reporting, file an updated return (ITR-U) to avoid penalties.
- Keep documentation for large transactions (property sale, mutual funds, shares, etc.) for easy explanation during assessment.