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Rule 114E is a regulation set forth under the Income Tax Rules, 1962. It mandates the filing of a Statement of Financial Transaction (SFT) for specific financial activities.
The primary purpose of the SFT is to enhance transparency in financial transactions and improve tax compliance. By requiring reporting of certain transactions, the Income Tax department gains visibility into potential high-value transactions that may require further scrutiny. This can help in detecting tax evasion and ensuring accurate tax assessments.
Here’s an exclusive table summarizing the nature and value of transactions that need to be reported under Rule 114E:
| S.N. | Nature and value of transactions | Class of person (Reporting person) |
|---|---|---|
| 1 |
(a) Cash payments exceeding ten lakh rupees in a financial year for the acquisition of bank drafts, pay orders, or banker's cheques. (b) Cash transactions amounting to ten lakh rupees or more during the financial year for purchasing pre-paid instruments published by the Reserve Bank of India (RBI) under section 18 of the (PSS) Payment and Settlement Systems Act, 2007 (51 of 2007). (c) Aggregate cash deposits or withdrawals, including those via bearer's cheques, amounting to fifty lakh rupees or more in a financial year, across one or more current accounts held by an individual. |
A banking institution, whether it be a banking company or a cooperative bank governed by the provisions of the (BR) Banking Regulation Act, 1949 (10 of 1949), including any bank or banking entity mentioned in section 51 of the aforementioned Act. |
| 2 | Aggregate cash deposits amounting to ten lakh rupees or more in a financial year across one or more accounts, excluding current accounts and time deposits held by an individual. |
(i) A banking institution, whether it be a banking company or a cooperative bank regulated by the (BR) Banking Regulation Act, 1949 (10 of 1949), including any bank or banking entity mentioned in section 51 of the aforementioned Act. (ii) The Post Master General as outlined in clause (j) of section 2 of the (IPO) Indian Post Office Act, 1898 (6 of 1898). |
| 3 | Aggregate time deposits, excluding those made by renewing another time deposit, amounting to ten lakh rupees or more in a financial year by an individual. |
(i) A banking institution, whether it's a banking company or a cooperative bank, is subject to the (BR) Banking Regulation Act, 1949 (10 of 1949), which also includes any bank or banking entity mentioned in section 51 of the aforementioned Act. (ii) The Post Master General as delineated in clause (j) of section 2 of (IPO) the Indian Post Office Act, 1898 (6 of 1898). (iii) Nidhi companies as defined in section 406 of the Companies Act, 2013 (18 of 2013). (iv) Non-banking financial companies (NBFCs) holding a certificate of registration U/S 45-IA of the Reserve Bank of India (RBI) Act, 1934 (6 of 1934), authorized to hold or accept deposits from the public. |
| 4 |
Payments made by an individual amounting to: (i) ₹1 lakh or more in cash; or (ii) ₹10 lakh or more through any other mode against invoices raised concerning one or more credit cards issued to that individual within a financial year. |
A banking institution, whether it's a banking company or a cooperative bank subject to the (BR) Banking Regulation Act, 1949 (10 of 1949), which also includes any bank or banking entity mentioned in section 51 of the aforementioned Act or any other company or institution issuing credit cards. |
| 5 | Receipt of ten lakh rupees or more from an individual within a financial year for the acquisition of bonds or debentures issued by the company or institution, excluding amounts received for the renewal of bonds or debentures issued by that same company. | A company or institution allocating bonds or debentures. |
| 6 | Receipt of ten lakh rupees or more from an individual within a financial year for the acquisition of shares (including share application money) issued by the company. | A company issuing shares |
| 7 | Purchase of shares from any individual (excluding shares acquired in the open market) amounting to ten lakh rupees or more within a financial year through a buyback process. | A company listed on a recognized stock exchange acquiring its own securities in accordance with section 68 of the Companies Act, 2013 (18 of 2013). |
| 8 | Receipt of ten lakh rupees or more from an individual within a financial year for the acquisition of units from one or more schemes of a Mutual Fund, excluding amounts received for transfers between schemes within the same Mutual Fund. | A trustee of a Mutual Fund or any other authorized person managing the affairs of the Mutual Fund as duly authorized by the trustee for this purpose. |
| 9 | Receipt from any individual for the sale of foreign currency, which includes crediting such currency to a foreign exchange card or incurring expenses in such currency through a credit or debit card, issuing travelers' checks or drafts, or utilizing any other instrument totaling ten lakh rupees or more during a financial year. | Authorized person, as described in clause (c) of section 2 of the (FEM) Foreign Exchange Management Act, 1999 (42 of 1999). |
| 10 | The acquisition or disposal of immovable property by any individual for a sum of ₹30 lakh or more, or appreciated by the stamp valuation authority as per section 50C of the Act at thirty lakh rupees or more. | Inspector-General appointed pursuant to section 3 of the Registration Act, 1908, or Registrar or Sub-Registrar designated U/S 6 of the same Act. |
| 11 | Receiving cash payments exceeding two lakh rupees for the sale of goods or services by any individual, excluding those specified at Serial Numbers 1 to 10 of this regulation, if applicable. | Any person who is liable for audit U/S 44AB of the Act. |
| 12 |
Cash deposits made between November 9, 2016, and December 30, 2016, totaling: (i) ₹12,50,000 or more across one or more current accounts of an individual or (ii) ₹2,50,000 or more across one or more accounts (excluding current accounts) of an individual. |
(i) A banking institution, including a banking company or a cooperative bank, subject to the Banking Regulation Act 1949 (10 of 1949), which also encompasses any bank or banking entity mentioned in section 51 of that Act; (ii) The Post Master General as delineated in clause (j) of section 2 of the (IPO) Indian Post Office Act, 1898 (6 of 1898). |
| 13 | Cash deposits made between April 1, 2016, and November 9, 2016, concerning accounts that fall under the reporting requirement specified above (S.N. -12) | (i) A banking institution, whether it's a banking company or a cooperative bank, subject to the (BR) Banking Regulation Act, 1949 (10 of 1949), which also includes any bank or banking entity mentioned in section 51 of that Act; (ii) The Post Master General as outlined in clause (j) of section 2 of the (IPO) Indian Post Office Act, 1898 (6 of 1898). |
The specific guidelines for preparing the Statement of Financial Transactions (SFT) are summarized in the following table:
| SFT- 001: Purchase of bank drafts or pay orders in cash | |
|---|---|
| Transaction Description | Purchase of pay orders or bank drafts or banker’s cheque in cash |
| Nature and value of a transaction | Cash payments for the acquisition of bank drafts, pay orders, or banker’s checks totaling ten lakh rupees or more within a financial year. |
| Class of person required to furnish | A banking institution, whether it be a banking company or a cooperative bank governed by the provisions of the (BR) Banking Regulation Act, 1949 (10 of 1949), including any bank or banking entity mentioned in section 51 of the aforementioned Act. |
| SFT- 002: Purchase of pre-paid instruments in cash | |
| Transaction Description | Purchase of prepaid instruments in cash |
| Nature and value of a transaction | Cash payments totaling ten lakh rupees or more during the financial year for the acquisition of pre-paid instruments allocated by the Reserve Bank of India U/S 18 of the Payment and Settlement Systems Act, 2007 (51 of 2007). |
| Class of person required to furnish | A banking institution, whether it's a banking company or a cooperative bank subject to the provisions of the (BR) Banking Regulation Act 1949 (10 of 1949), which also encompasses any bank or banking entity mentioned in section 51 of that Act. |
| SFT- 003: Cash deposits or withdrawals in a current account | |
| Transaction Description | Deposits or withdrawals of cash, including transactions made via bearer's cheque, in a current account. |
| Nature and value of a transaction | Cash deposits or withdrawals, including those conducted through bearer's cheques, totaling fifty lakh rupees or more in a financial year across one or more current accounts belonging to an individual. |
| Class of person required to furnish | A banking institution, whether it's a banking company or a cooperative bank subject to the provisions of the (BR) Banking Regulation Act, 1949 (10 of 1949), which also includes any bank or banking entity mentioned in section 51 of that Act. |
| SFT- 004: Cash deposit in an account other than the current account | |
| Transaction Description | Cash deposits in one or more accounts belonging to an individual, excluding current accounts and time deposits. |
| Nature and value of a transaction | Aggregate cash deposits amounting to ten lakh rupees or more in a financial year across one or more accounts owned by an individual, excluding current accounts and time deposits. |
| Class of person required to furnish | A banking institution subject to the (BR) Banking Regulation Act, 1949 (10 of 1949), including any bank or banking entity mentioned in section 51 of that Act, as well as the Post Master General as outlined in clause (j) of section 2 of the (IPO) Indian Post Office Act, 1898 (6 of 1898). |
| SFT- 005: Time deposit | |
| Transaction Description | Time deposits, excluding those made by renewing another time deposit. |
| Nature and value of a transaction | One or more time deposits, excluding those made through the renewal of another time deposit belonging to an individual, totaling ten lakh rupees or more within a financial year. |
| Class of person required to furnish | (i) A banking institution subject to the (BR) Banking Regulation Act, 1949 (10 of 1949), including any bank or banking entity mentioned in section 51 of that Act. |
| (ii) The Post Master General as outlined in clause (j) of section 2 of the (IPO) Indian Post Office Act, 1898 (6 of 1898). | |
| (iii) Nidhi companies as defined in section 406 of the Companies Act, 2013 (18 of 2013). | |
| (iv) Non-banking financial companies holding a certificate of registration U/S 45-IA of the (RBI) Reserve Bank of India Act, 1934 (6 of 1934), authorized to hold or accept deposits from the public. | |
| SFT- 006: Payment for credit card | |
| Transaction Description | Payments made by an individual concerning one or more credit cards issued to them within a financial year. |
| Nature and value of a transaction | Payments made by an individual totaling:- |
| (i) ₹1 lakh rupees or more in cash; or | |
| (ii) ₹10 lakh rupees or more through any other mode against invoices raised for one or more credit cards issued to that individual within a financial year. | |
| Class of person required to furnish | A banking institution subject to the (BR) Banking Regulation Act, 1949 (10 of 1949), including any bank or banking entity mentioned in section 51 of that Act or any other institution or company issuing credit cards. |
| SFT- 007: Purchase of debentures | |
| Transaction Description | The acquisition of bonds or debentures issued by a company or institution within a year. |
| Nature and value of a transaction | Receipt of ten lakh rupees or more from an individual within a financial year for acquiring debentures or bonds allocated by a company or institution, excluding amounts received for the renewal of bonds or debentures issued by that same company. |
| Class of person required to furnish | A company or institution issuing debentures or bonds. |
| SFT- 008: Purchase of shares | |
| Transaction Description | Acquisition of shares (including share application money) issued by the company. |
| Nature and value of a transaction | Receipt of ten lakh rupees or more from an individual within a financial year for acquiring shares (share application money included) issued by the company. |
| Class of person required to furnish | A company issuing shares. |
| SFT- 009: Buyback of shares | |
| Transaction Description | Buyback of shares |
| Nature and value of a transaction | Repurchase of shares from any individual (excluding shares bought in the open market) amounting to ten lakh rupees or more within a financial year. |
| Class of person required to furnish | A company listed on a recognized stock exchange buying back its own securities in accordance with section 68 of the Companies Act, 2013 (18 of 2013). |
| SFT- 010: Purchase of mutual fund units | |
| Transaction Description | Acquisition of mutual fund units within a financial year for obtaining units of one or more schemes of a Mutual Fund. |
| Nature and value of a transaction | Receipt of ten lakh rupees or more from an individual within a financial year for purchasing units of one or more schemes of a Mutual Fund, excluding amounts received for transferring from one scheme to another scheme of that Mutual Fund. |
| Class of person required | A trustee of a Mutual Fund or any other individual authorized by the trustee to manage the affairs of the Mutual Fund. |
| SFT- 011: Purchase of foreign currency | |
| Transaction Description | Purchase of foreign currency |
| Nature and value of a transaction | Receipt of ten lakh rupees or more from an individual for the sale of foreign currency, comprising any credit of such currency to a foreign exchange card or expenses in such currency through a debit or credit card, issuance of travelers' cheques or drafts, or any other instrument within a financial year. |
| Class of person required to furnish | Authorized person as described in clause (c) of section 2 of the (FEMA) Foreign Exchange Management Act, 1999 (42 of 1999) |
| SFT- 012: Purchase or sale of immovable property | |
| Transaction Description | Purchase or sale of immovable property. |
| Nature and value of a transaction | Purchase or sale of immovable property by any individual for an amount of thirty lakh rupees or more, or valued at thirty lakh rupees or more by the stamp valuation authority referred to in section 50C of the Act. |
| Class of person required to furnish | Inspector-General appointed pursuant to section 3 of the Registration Act, 1908, or Registrar/Sub-Registrar appointed under section 6 of the same Act. |
| SFT- 013: Cash payment for goods and services | |
| Transaction Description | Cash transactions for goods and services |
| Nature and value of a transaction | Receipt of cash payments exceeding two lakh rupees for the sale of goods or services of any kind by any individual, excluding those specified at Serial Numbers 1 to 10 of Rule 114E. |
| Class of person required to furnish | Any person who is accountable for audit U/S 44AB of the IT Act. |
| SFT- 014: Cash deposits during a specified period | |
| Transaction Desription | Cash deposits made during two periods: from April 1, 2016, to November 8, 2016, and from November 9, 2016, to December 30, 2016. |
| Nature and value of a transaction |
Cash deposits made during two specific periods:
|
| Class of person required to furnish | (i) A banking institution subject to the (BR) Banking Regulation Act, 1949 (10 of 1949), including any bank or banking entity mentioned in section 51 of that Act. |
| (ii) The Post Master General as outlined in clause (j) of section 2 of the (IPO) Indian Post Office Act, 1898 (6 of 1898). | |
The statement of financial transactions required under subsection (1) of section 285BA of the Act must be provided for each financial year using Form No. 61A and must be verified according to the instructions provided therein.
Preparing the Statement of Financial Transactions (SFT) involves two main steps. First, identify the transactions, persons, or accounts that are reportable under Rule 114E. Second, provide details of these reportable transactions, persons, or accounts.
Failure to file SFT within the due date will result in a penalty under Section 271FA of Rs 500 per day. The authorities will issue a notice requiring the form to be submitted within 30 days.
Rule 114E of the (IT) Income Tax Rules, 1962 (hereinafter referred to as the Rules) stipulates that the statement of financial transactions required under subsection (1) of section 285BA of the Act must be provided in Form No. 61A.
