Special Financial Transactions Reporting under Section 285BA of Income Tax Act

In India, the Special Financial Transactions (SFT) reporting mechanism is a regulatory measure designed to monitor high-value transactions and ensure better tax compliances. For effective monitoring, the Income Tax Act requires specified entities to report certain transactions exceeding a specified threshold to the Income Tax Department on the designated portal. The Special Financial Transactions reporting framework aims to reduce tax evasion and improve the transparency of financial activities.

Understanding Special Financial Transactions (SFT) Reporting Requirements

Under Section 285BA of the Income Tax Act, 1961, specific types of transactions are required to be reported by taxpayers. These disclosures are crucial for improving tax governance and promoting accountability across financial activities.

Key Transactions Reportable under Section 285BA

Taxpayers must report the following transactions under Special Financial Transactions reporting:

• Receipt from any person of an amount aggregating to ten lakh rupees or more in a financial year for acquiring bonds or debentures issued by a company or institution.
• Receipt from any person of an amount aggregating to ten lakh rupees or more in a financial year for acquiring shares (including share application money) issued by the company.
• Buyback of shares from any person (other than those bought in the open market) for an amount or value aggregating to ten lakh rupees or more in a financial year.
• Receipt of cash payment exceeding two lakh rupees for sale, by any person, of goods or services of any nature.
• Dividend income earned by any company.

These reporting requirements ensure that all high-value financial transaction reporting obligations are met in line with SEBI and Income Tax Department guidelines, promoting transparent corporate and financial governance.

MBG’s Role in SFT Filing and Compliance Support

MBG Corporate Services can assist businesses in navigating the complexities of Special Financial Transactions reporting by providing:

• Assistance in identifying specified transactions that require reporting under Section 285BA of the Income Tax Act.
• Support in the preparation and filing of relevant forms for SFT filing and compliance support through our Financial Reporting Support services.

MBG’s financial reporting and audit assistance ensures that organizations remain fully compliant with statutory obligations while minimizing the risk of penalties and ensuring accuracy in tax submissions