In response to the growing need for enhanced tax transparency and better monitoring of income sources, the Central Board of Direct Taxes (CBDT) introduced a revised framework for the Statement of Financial Transactions (SFT) in 2021. Under this mandate, companies and other dividend-distributing entities are required to report dividend payments made to shareholders. These reports must be submitted annually, with a due date of May 31st following the end of the relevant financial year.
Statement of Financial Transactions (SFT) – An Overview
The Statement of Financial Transactions (SFT), previously known as the Annual Information Return (AIR), is a vital compliance mechanism introduced by the Income Tax Department to enhance transparency and detect tax evasion. It enables authorities to monitor high-value financial transactions carried out by individuals and entities, helping to ensure a more robust and accountable financial system.
What Does the SFT Report?
The SFT captures information on specified high-value transactions, such as:
Purchase or sale of immovable property (land, buildings, etc.)
Large cash deposits in bank accounts
Investments in mutual funds, bonds, or other securities
High-value foreign exchange transactions
Who is Required to File an SFT?
Filing obligations extend to a broad range of entities and individuals, including:
Banks and financial institutions
Companies and registered businesses
Trusts, partnerships, and other reporting entities
Individuals engaging in high-value financial transactions
Key Benefits of SFT
Enhances Tax Compliance: Offers taxpayers a record of reportable transactions, aiding accurate filing.
Combats Tax Evasion: Makes it harder to conceal income or conduct unreported transactions.
Promotes Transparency: Allows tax authorities to verify financial activities across the system.
Expands the Tax Base: Brings more entities under the tax net through transaction tracking.
Filing Procedure
SFTs must be submitted electronically through the Income Tax Department’s e-filing portal using prescribed forms and formats. The deadline for submission is typically May 31st of the year following the financial year in which the transactions occurred. The required form and threshold vary depending on the nature of the transaction and the reporting entity.
Deadline for Submission of SFT for Dividend Income
The Statement of Financial Transactions (SFT) for dividend income must be submitted by May 31st of the year following the end of the financial year in which the dividends were received.
Example:
If dividend income was received during the financial year 2023–24 (April 1, 2023 – March 31, 2024), the deadline for submitting the corresponding SFT is May 31, 2025
Eligibility Criteria for Filing SFT on Dividend Income
Filing requirements for SFT related to dividend income are based on two key factors: the transaction value and the type of company issuing the dividend.
1. Threshold Amount
The SFT requirement applies only if the total dividend income exceeds ₹10 lakh in a financial year.
If your total dividend earnings are below ₹10 lakh, you are not required to file an SFT for dividend income.
2. Company Type
Listed Companies:
If the dividend is received from a company listed on a recognized Indian stock exchange, the SFT filing is triggered once the ₹10 lakh threshold is crossed.Unlisted Companies:
For dividends received from unlisted companies, SFT reporting is required only when:Dividend income exceeds ₹10 lakh, and
The recipient holds shares in the company with a fair market value over ₹50 lakh
Guidelines for Preparing the Statement of Financial Transactions (SFT) for Dividend Income
1. Required Information
To accurately prepare the SFT for dividend income, ensure the following data is collected:
Company Details:
Name, PAN, and registered address of the company distributing dividends.
Dividend Distribution:
Date of dividend declaration.
Total dividend amount distributed.
Individual amounts paid to shareholders receiving over ₹10 lakh in dividends.
Shareholder Information:
Name, PAN, and address of each shareholder receiving dividends above ₹10 lakh.
For unlisted companies: Ensure the fair market value of the shareholder’s equity exceeds ₹50 lakh.
Transaction Specifics:
Amount of dividend received.
Date of each relevant transaction.
2. Format and Documentation
Submit the report electronically using Form 61A.
File through the Income Tax e-filing portal.
Ensure the form is digitally signed using a DSC or EVC.
Maintain backup records such as dividend payout statements and shareholding proofs for audit purposes.
Procedure to Submit SFT on the Reporting Portal
Step 1: Registration/Login
Visit the Reporting Portal.
Register using PAN, TAN, or a valid Digital Signature Certificate (DSC).
If already registered, log in using your credentials.
Step 2: Form Selection
Select Form 61A – Statement of Financial Transactions.
Choose the appropriate reporting entity (typically the dividend-paying company).
Step 3: Data Entry
Fill out Form 61A with:
Company and shareholder details.
Dividend declaration and transaction data.
Ensure that all information is accurate and complete.
Step 4: Upload Supporting Documents (If Required)
Attach documents like dividend distribution statements or shareholder holding certificates as applicable.
Step 5: Authentication
Use DSC or EVC to digitally sign and validate the form.
Step 6: Submission
Submit the completed Form 61A electronically to the Income Tax Department.
Step 7: Acknowledgement
Download and store the acknowledgement receipt as proof of submission.
Step 8: Track Status
Monitor the filing status through the “Track Status” feature on the portal.
Frequently Asked Questions (FAQs) – SFT for Dividend Income
1. What types of dividend transactions are reported under SFT?
. What types of dividend transactions are reported under SFT?
SFT reporting for dividend income includes:
Dividend payouts exceeding ₹10 lakh in a financial year.
Dividends from unlisted companies, provided:
The dividend amount exceeds ₹10 lakh, and
The recipient holds shares with a fair market value above ₹50 lakh
2. Is filing of SFT mandatory?
Yes, filing is compulsory for:
Companies or entities disbursing dividends that cross the specified thresholds.
Individuals or shareholders receiving dividend income that triggers SFT reporting
3. How is dividend income reflected in the Reporting Portal?
Individual taxpayers do not file SFT themselves; it is submitted by the dividend-paying entity.
The Income Tax Department pre-fills this information in your ITR based on the SFT data received.
However, if you’re a company or responsible entity:
Log in to the Reporting Portal.
Select Form 61A – Statement of Financial Transactions.
Fill in details about the company, dividends, eligible shareholders, and amounts.
Attach supporting documents (if required), digitally sign, and submit the form
4. What is SFT in the context of dividend income?
SFT (Statement of Financial Transactions) is a regulatory requirement introduced by the CBDT to monitor and report high-value financial transactions, including dividend income. It enhances tax transparency and helps in preventing underreporting or evasion.
5. What are the penalties for non-compliance with SFT filing?
Non-compliance can attract significant penalties:
Late submission: ₹100 per day of delay.
Incorrect or incomplete information: Up to ₹10,000 per error.
Failure to file: Can result in penalties up to ₹1,00,000 and, in extreme cases, prosecution.
6. Do tax audit assessees need to file SFT?
Yes. Entities subject to a tax audit must file SFT if they meet the dividend income thresholds, irrespective of their audit status.
