Form 61A: Reporting Specified Financial Transactions (SFT)

Form 61A. Are you aware of the high-value financial transactions you need to report to the Income Tax Department each year? Form 61A is a crucial compliance requirement that helps tax authorities monitor specified financial transactions (SFTs) and detect potential tax evasion. As we head into the financial year 2024-25, it’s essential for taxpayers and reporting entities to understand the ins and outs of Form 61A.

In this article, we’ll guide you about Form 61A, its purpose, who needs to file it, the transactions covered, deadlines, and consequences of non-compliance.

Also Read-How to Calculate Your Income Tax in India: Step-by-Step Guide

What is Form 61A?

Form 61A, also known as the Statement of Specified Financial Transactions (SFT), is a report that captures details of certain high-value financial transactions carried out by taxpayers during a financial year. This form was introduced under Section 285BA of the Income Tax Act, 1961, read with Rule 114E of the Income Tax Rules, 1962.

The primary objective of Form 61A is to assist the Income Tax Department in monitoring specified financial transactions, analyzing taxpayer behavior, and identifying potential cases of tax evasion.

Who Needs to File Form 61A?

Various entities, referred to as “reporting persons,” are required to file Form 61A. These include:

1. Persons liable for audit under Section 44AB of the Income Tax Act
2. Banking companies and cooperative banks
3. Post Office
4. Nidhi companies (as defined under Section 406 of the Companies Act, 2013)
5. Non-Banking Financial Companies (NBFCs)
6. Companies or institutions issuing bonds or debentures
7. Companies issuing shares
8. Listed companies purchasing their own securities under Section 68 of the Companies Act, 2013
9. Trustees of mutual funds or authorized persons managing mutual fund affairs
10. Authorized persons under the Foreign Exchange Management Act (FEMA), 1999
11. Registrar or Sub-Registrar appointed under the Registration Act, 1908
12. Companies or institutions issuing credit cards

Transactions Covered Under Form 61A.

Form 61A covers a wide range of specified financial transactions. Some of the key transactions and their respective reporting thresholds for the financial year 2024-25 include:

1. Cash deposits or withdrawals aggregating to Rs. 50 lakh or more in a financial year, in one or more current accounts of a person
2. Cash deposits aggregating to Rs. 10 lakh or more in a financial year, in one or more accounts (other than current accounts and time deposits) of a person
3. One or more time deposits (other than renewals) of a person aggregating to Rs. 10 lakh or more in a financial year
4. Payments made by any person of an amount aggregating to Rs. 1 lakh or more in cash or Rs. 10 lakh or more by any other mode against bills raised in respect of one or more credit cards issued to that person
5. Receipt from any person of an amount aggregating to Rs. 10 lakh or more in a financial year for acquiring bonds or debentures issued by the company or institution
6. Receipt from any person of an amount aggregating to Rs. 10 lakh or more in a financial year for acquiring shares (including share application money) issued by the company
7. Buy-back of shares from any person (other than bought in the open market) for an amount or value aggregating to Rs. 10 lakh or more in a financial year by a listed company
8. Receipt from any person of an amount aggregating to Rs. 10 lakh or more in a financial year for acquiring units of one or more schemes of a Mutual Fund
9. Receipt from any person of an amount aggregating to Rs. 10 lakh or more in a financial year for sale of foreign currency including against credit card, debit card or any other instrument issued by a bank or financial institution
10. Purchase or sale by any person of immovable property for an amount of Rs. 30 lakh or more or valued by the stamp valuation authority at Rs. 30 lakh or more
11. Receipt of cash payment exceeding Rs. 2 lakh for sale of goods or services by persons liable for audit under Section 44AB

Components of Form 61A.

Form 61A consists of two main parts:

1. Part A: This section contains statement-level information and is common for all transaction types. It includes details such as the reporting person’s name, address, PAN, and the financial year for which the transactions are being reported.
2. Report Level Information: Depending on the nature of the transaction, the report level information is provided in one of the following parts:
   • Part B: Person-based reporting
   • Part C: Account-based reporting
   • Part D: Immovable property transaction reporting

Due Date for Filing Form 61A.

The due date for filing Form 61A is May 31 immediately following the financial year in which the specified financial transactions were recorded or registered. For example, for the financial year 2024-25 (April 1, 2024, to March 31, 2025), the due date for filing Form 61A would be May 31, 2025.

Consequences of Non-Compliance.

Failure to file Form 61A within the due date or filing an inaccurate or defective statement can result in penalties under the Income Tax Act:

1. Section 271FA: If a reporting person fails to file Form 61A within the due date, a penalty of Rs. 500 per day may be imposed for each day of default.
2. Section 271FAA: If a reporting person provides inaccurate information in Form 61A, a penalty of Rs. 50,000 may be levied.

Additionally, if a reporting person fails to file Form 61A even after receiving a notice from the Income Tax Department, a penalty of Rs. 1,000 per day may be imposed from the day immediately following the expiry of the time specified in the notice until the default continues.

How to File Form 61A.

Form 61A must be filed electronically on the Income Tax Department’s reporting portal. The steps involved in filing Form 61A are as follows:

1. Registration: The reporting person must register on the reporting portal using their PAN and obtain an Income Tax Department Reporting Entity Identification Number (ITDREIN).
2. Preparation of Statements: The reporting person must generate the specified financial transaction statements in XML format as per the prescribed schema.
3. Submission: The XML file must be digitally signed and encrypted using the submission utility provided by the Income Tax Department. The prepared package is then uploaded to the reporting portal.
4. Acknowledgment: Upon successful submission, an acknowledgment number will be sent to the registered email ID of the reporting person.

Recent Developments and Studies

In recent years, the Income Tax Department has been focusing on expanding the scope of Form 61A to cover more financial transactions and improve tax compliance. Some of the recent developments and studies related to Form 61A include:

1. Widening the Scope: The Finance Act, 2020, amended Section 285BA to include more transactions under the purview of Form 61A, such as cash deposits or withdrawals aggregating to Rs. 50 lakh or more in a financial year in one or more current accounts of a person.
2. Data Analysis: The Income Tax Department has been leveraging data analytics and artificial intelligence to analyze the information reported in Form 61A and identify potential cases of tax evasion. A study conducted by the Central Board of Direct Taxes (CBDT) in 2022 revealed that the use of data analytics has helped in detecting a significant number of high-risk cases and has improved tax compliance.
3. Impact on Tax Revenue: A recent study by the National Institute of Public Finance and Policy (NIPFP) in 2023 found that the introduction of Form 61A has led to a substantial increase in tax revenue for the government. The study estimated that the additional tax revenue generated due to Form 61A was around Rs. 10,000 crore in the financial year 2022-23.

Conclusion

Form 61A plays a vital role in helping the Income Tax Department monitor high-value financial transactions and detect potential cases of tax evasion. As a taxpayer or reporting entity, it is crucial to understand the requirements of Form 61A and ensure timely and accurate compliance.

By staying informed about the latest developments and guidelines related to Form 61A, you can avoid penalties and contribute to a more transparent and efficient tax system. As we move into the financial year 2024-25, let us all pledge to fulfill our tax obligations diligently and support the government’s efforts in building a robust and equitable tax regime.

C.K. Gupta

Hello, I am C.K. Gupta Founder of Taxgst.in, a seasoned finance professional with a Master of Commerce degree and over 20 years of experience in accounting and finance. My extensive career has been dedicated to mastering the intricacies of financial management, tax consultancy, and strategic planning. Throughout my professional journey, I have honed my skills in financial analysis, tax planning, and compliance, ensuring that all practices adhere to the latest financial regulations. My expertise also extends to auditing, where I focus on maintaining accuracy and integrity in financial reporting. I am passionate about using my knowledge to provide insightful and reliable financial advice, helping businesses optimize their financial strategies and achieve their economic goals. At Taxgst.in, I aim to share valuable insights that assist our readers in navigating the complex world of taxes and finance with ease.