CBDT has issued a Notification No. 1/2023 dated 05.01.2023 amending the rules for reporting of interest income in Statement of Financial Transactions (SFT) effective from 5th January 2023. This notification is issued to amend the Guidelines for submission of Statement of Financial Transactions (SFT) notified vide Notification No. 2/2021 dated 20.04.2021 and accordingly all interest income in required to be reported in SFT and the threshold limit of Rs. 5,000 will not apply. Interest earned on Jan Dhan accounts is kept out of the purview of reporting through SFT.
The provisions related to the submission of SFT are contained in Section 285BA and Rule 114E of the Income-tax Act, 1961 (‘Act’) and Income-tax Rules, 1962 (‘Rules’).
Section 285BA and Rule 114E deal with the filing of Statement of Financial Translations (SFT) in Form 61A by various persons. Section 285BA was further amended in 2019 by the Finance (No. 2) Act, 2019. The amendment was carried out in order to enable the pre-filling of return of income, It was also intended to obtain information by widening the scope of furnishing of statement of financial transactions by mandating the furnishing of statements by certain prescribed persons other than those who are currently furnishing the same.
Read Also:
A Guide to Section 285BA and Rule 114E on Statement of Financial Translations (SFT) in Form 61A
While presenting the Union Budget, 2021 on 1st Feb., 2021, the Finance Minister announced for pre-filling of returns in order to ease the filing of returns. The Budget proposes that details of capital gains from listed securities, dividend income and interest from banks, post office etc. will also be pre-filled in returns. Details of salary income, tax payment, TDS etc. already come pre-filled in returns.
Earlier, CBDT vide Notification No. 16/2021 dated 12.03.2021 and Income-tax (4th Amendment) Rules, 2021 amends Income Tax Rule 114E read with Section 285BA of the Income Tax Act, 1961 requiring companies, depositories, post offices and other agencies to report capital gains on transfer of listed securities or units of Mutual Funds, dividend income and interest income for the purpose of pre-filling the return of income.
The statement of financial transaction (SFT) shall be filed in Form 61A electronically on the e-filing portal of the Income Tax Department. With effect from 9th April 2018, registration, statement upload and all other facilities for Form No. 61A have been migrated from the e-filing portal to the “Reporting Portal” (https://report.insight.gov.in).
Also Read: CBDT Amends Rule 114E to Report Capital Gains, Interest and Dividend Income for Pre-filling Return
Sub-Rule (5A) of Rule 114E provides for reporting the following incomes by the specified reporting persons -
The said Notification No. 16/2021 states that the Principal Director General of Income Tax (Systems) or the Director-General of Income Tax (Systems) with the approval of the Board will specify the-
Form
Time Limit or due date
Frequency, and
Manner
in which the statement needs to be furnished by the reporting persons. Further, as per sub-rule (4)(b) of Rule 114E, Director General of Income-tax (Systems) shall specify the procedures, data structures and standards for ensuring secure capture and transmission of data, evolving and implementing appropriate security, archival and retrieval policies.
In this context, the Directorate of Income Tax (Systems) issued Notification No. 2/2021 on 20.04.2021 specifying the format, procedure and guidelines for submission of Statement of Financial Transactions(SFT) for Interest Income.
Further, SFT for Interest Income in Form No. 61A is required to be filed online within 31st May of every year for the immediately preceding financial year. It is an annual compliance.
The Notification of 2021 contains ‘Annecure-A’ titled ‘Guidelines for Preparation of Statement of Financial Transactions (SFT)’ which inter alia contains one column with the heading ‘Remarks’. Serial No. 1 of the ‘Remarks’ states that “The information is to be reported for all account/deposit holders where cumulative interest exceeds Rs 5,000/ per person in the financial year.”
This requirement is now modified with Notification of 2023 which now reads as under-
“The information is to be reported for all account/deposit holders where any interest exceeds zero per account in the financial year excluding Jan Dhan Accounts”.
The outcomes of the modification are listed below-
1. Henceforth, all the interest income will be required to be reported in SFT. The exemption of Rs. 5,000 from reporting has been dispensed with.
2. Interest income from Jan Dhan account is not required to be reported. This exclusion was not there earlier.
This modification shall come into effect from 05.01.2023.
Who is required to furnish SFT for Interest Income: The following Class of person is required to furnish SFT for Interest Income:
1. A Bank including a Co-operative Bank
2. Post Office
3. An NBFC Company
Others: 1. The information is to be reported for all account/deposit holders where interest income is earned in a financial year. The limit of Rs. 5,000 is abolished w.e.f 05.01.2023.
2. Interest which is exempt from tax under the Income-tax Act, 1961 such as interest on Public Provident Fund (PPF) Account, Foreign Currency Non-resident (FCNR) Account, Sukanya Samriddhi Account, Resident Foreign Currency Account etc. need not be reported.
3. The reporting person is required to report the interest income on ‘gross interest’ basis without considering the deduction of Rs. 10,000/ available under section 80TTA. Though not stated but it follows that deduction of Rs. 50,000 for interest income under section 80TTB shall also not be reduced.
4. In the case of a joint account, the interest paid/credited should be assigned to the first/primary account holder or specified assigned person as per Form 37BA.
5. Where the account holder is a minor, the information shall be reported in the name of the Legal Guardian.
6. Separate report is required to be submitted for each account type (i.e. S-Savings, T-Time Deposit, R-Recurring Deposit, O-Others) and Interest on the same account type is required to be aggregated in the report.
Read the full text of Notification No. 01/2023 dated 05.01.2023 on SFT reporting for all Interest income u/s 285BA and Rule 114E
DGIT(S)/ADG(S)-2/Reporting Portal/2021/180
Government of India
Ministry of Finance
Central Board of Direct Taxes
Directorate of Income Tax (Systems)
Notification No. 1 of 2023
New Delhi, 05.01.2023
Addendum to Notification 2 of 2021: Format, Procedure and Guidelines for submission of Statement of Financial Transactions (SFT) for Interest income (Abolishing of limit of Rs 5,000/-).
Section 285BA of the Income Tax Act, 1961 and Rule 114E requires specified reporting persons to furnish statement of financial transaction (SFT). For the purposes of prefilling the return of income, CBDT has issued Notification No. 16/2021 dated 12.03.2021 to include reporting of information relating to interest income. The Format, Procedure and Guidelines for submission of Statement of Financial Transactions (SFT) for Interest income was notified via Notification 2 of 2021 dated 20th April 2021.
2. As per sub-rule (4)(b) of Rule 114E Director General of Income-tax (Systems) shall specify the procedures, data structures and standards for ensuring secure capture and transmission of data, evolving and implementing appropriate security, archival and retrieval policies.
3. The Remarks column point 1 at Annexure A-- Guidelines for Preparation of Statement of Financial Transactions (SFT) mentioned “The information is to be reported for all account/deposit holdors where cumulative interest exceeds Rs 5,0001 per person in the financial yeaf”.
4. The Remarks column at Annexure A is hereby being modified and may be read as “The information is to be reported for all account/deposit holders where any interest exceeds zero per account in the financial year excluding Jan Dhan Accounts”.
5. In the view of the changes mentioned above, the limit prescribed in Notification 2 of 2021 dated 20th April 2021 stands abolished and this addendum will come into effect from 05.01.2023.
(Govind Lal)
DGIT (System)-2, CBDT
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