CBDT lays down Format, Procedure & Guidelines for submission of SFT for Dividend & Interest income

CBDT prescribes format, Procedure & Guidelines for submission of Statement of Financial Transactions (SFT) for Dividend income & Interest income

Section 285BA of the Income Tax Act, 1961 and Rule 114E requires specified reporting persons to furnish statement of financial transaction (SFT).

Earlier CBDT, for the purposes of pre­ filling the return of income, issued Notification No.16/2021 dated 12.03.2021 to include reporting of information relating to dividend income.

The new sub rule 5A of rule 114E specifies that the information shall be furnished in such form ,at such frequency, and in such manner, as may be specified by the Director General of Income Tax (Systems), with the approval of the Board.

Format, Procedure & Guidelines for submission of SFT

The Guidelines have been issued vide CBDT Notification No. 1/2021 and Notification No. 2/2021 dated 20th April, 2021 for preparation and submission of SFT information and the data structure and validation rules for dividend income and interest income. To know the procedure for registration, Notification No. 3 of 2018 dated 5.04.2018 may be referred.

Reporting entities are required to prepare the data file in prescribed format from their internal system. An excel based report preparation utility has also been provided to assist small reporting entities in preparing data file. The data files prepared by internal system/report preparation utility should be validated using Text File Validator/Submission Utility. After validation, the text file is required to be compressed, encrypted and signed using the Text File Submission Utility before uploading on the reporting portal. Reporting entities, having large number of data files, can also submit the data files using SFTP Server (specific request may be made for SFTP upload).

The statement of financial transactions is to be furnished on or before the 31st May, immediately following the financial year in which the transaction is registered or recorded.

The SFT shall be signed, verified and furnished by the specified Designated Director. Where the reporting person is a non­resident, the statement may be signed, verified and furnished by a person who holds a valid power of attorney from such Designated Director. The data files are required to be uploaded at the reporting portal through the login credentials (PAN and password) of the designated director.

The reporting entities are advised to provide information of dividend income, reported to Income Tax Department, to the taxpayers which will enable them to reconcile the information displayed in the Annual Information Statement (AIS) (Form 26AS) .

In case, the reporting person/entity comes to know or discovers any inaccuracy in the information provided in the statement or the defects have been communicated to the reporting person/entity, it is required to remove the defects by  submitting a correction/deletion statement.

The reporting person/entity is required to document and implement appropriate information security policies and procedures with clearly defined roles and responsibilities to ensure security of submitted information and related information/documents. The reporting person/entity is also required to document and implement appropriate archival and retrieval policies and procedures with clearly defined roles and responsibilities to ensure that submitted information a nd related information/documents are available promptly to the competent authorities.

The Notification contains Annexures as under:

• Commonality of directors of companies does not mean deposits received was bogus
• Application though named as rectification but if tax is not legitimate, it also touches merit: HC
• Cost of acquisition as on 01.04.1981 taken as per valuer report by reverse indexing of FMV
• AO was directed to serve notice of hearing through physical mode upon assessee 
• ICAI Intermediate & Foundation Examinations to be held thrice in a year from May/June 2024