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Rule 114E of Income Tax Act

Khush Trivedi , Last updated: 03 May 2024  
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Introduction 

As we all are aware there are numerous transactions that are made by an assessee during the financial year which contains some transaction that might have possibility of tax evasions due to which Income tax act introduced rule 114E which mandates the filing of a Statement of Financial Transaction (SFT) for specific financial activities in order to enhance transparency in financial transactions and improve tax compliance. In this article you will learn about all the transactions of which reporting is required under the said rule.

Rule 114E of Income Tax Act

Transaction Reportable under Rule 114E

Following table comprises the transactions reportable under rule 114E

 
Sl. No. Nature & Value of transaction  Reporting Person
1

(a) Cash payments exceeding ten lakh rupees in a financial year for the acquisition of bank drafts, pay orders, or banker's cheques.

(b) Cash transactions amounting to ten lakh rupees or more during the financial year for purchasing pre-paid instruments published by the Reserve Bank of India (RBI) under section 18 of the (PSS) Payment and Settlement Systems Act, 2007 (51 of 2007).

(c) Aggregate cash deposits or withdrawals, including those via bearer's cheques, amounting to fifty lakh rupees or more in a financial year, across one or more current accounts held by an individual.

A banking company or a co-operative bank to which the Banking Regulation Act, 1949 (10 of 1949) applies (including any bank or banking institution referred to in section 51 of that Act).
2 Cash deposits aggregating to ten lakh rupees or more in a financial year, in one or more accounts (other than a current account and time deposit) of a person.

(i) A banking company or a co-operative bank to which the Banking Regulation Act, 1949 (10 of 1949) applies (including any bank or banking institution referred to in section 51 of that Act);

(ii) Post Master General10 as referred to in clause (j) of section 2 of the Indian Post Office Act, 1898 (6 of 1898).

3 One or more time deposits (other than a time deposit made through renewal of another time deposit) of a person aggregating to ten lakh rupees or more in a financial year of a person.

(i) A banking company or a co-operative bank to which the Banking Regulation Act, 1949 (10 of 1949) applies (including any bank or banking institution referred to in section 51 of that Act);

(ii) Post Master General10 as referred to in clause (j) of section 2 of the Indian Post Office Act, 1898 (6 of 1898).

(iii) Nidhi referred to in section 406 of the Companies Act, 2013 (18 of 2013);

(iv) Non-banking financial company which holds a certificate of registration under section 45-IA of the Reserve Bank of India Act, 1934 1[(2 of 1934)], to hold or accept deposit from public.

4

Payments made by any person of an amount aggregating to—

(i) one lakh rupees or more in cash; or

(ii) ten lakh rupees or more by any other mode,
against bills raised in respect of one or more credit cards issued to that person, in a financial year.

(i) A banking company or a co-operative bank to which the Banking Regulation Act, 1949 (10 of 1949) applies (including any bank or banking institution referred to in section 51 of that Act);
5 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 the company or institution (other than the amount received on account of renewal of the bond or debenture issued by that company) A company or institution issuing bonds or debentures.
6 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. A company issuing shares.
7 Buy back of shares from any person (other than the shares bought in the open market) for an amount or value aggregating to ten lakh rupees or more in a financial year. A company listed on a recognised stock exchange purchasing its own securities under section 68 of the Companies Act, 2013 (18 of 2013).
8 Receipt from any person of an amount aggregating to ten lakh rupees or more in a financial year for acquiring units of one or more schemes of a Mutual Fund (other than the amount received on account of transfer from one scheme to another scheme of that Mutual Fund). A trustee of a Mutual Fund or such other person managing the affairs of the Mutual Fund as may be duly authorised by the trustee in this behalf.
9 Receipt from any person for sale of foreign currency including any credit of such currency to foreign exchange card or expense in such currency through a debit or credit card or through issue of travellers cheque or draft or any other instrument of an amount aggregating to ten lakh rupees or more during a financial year. Authorised person as referred to in clause (c) of section 2 of the Foreign Exchange Management Act, 1999 (42 of 1999).
10 Purchase or sale by any person of immovable property for an amount of thirty lakh rupees or more or valued by the stamp valuation authority referred to in section 50C of the Act at thirty lakh rupees or more. Inspector-General appointed under section 3 of the Registration Act, 1908 or Registrar or Sub-Registrar appointed under section 6 of that Act.
11 Receipt of cash payment exceeding two lakh rupees for sale, by any person, of goods or services of any nature (other than those specified at Sl. Nos. 1 to 10 of this rule, if any.)    
 
Any person who is liable for audit under section 44AB of the Act
12

Cash deposits during the period 09th November, 2016 to 30th December, 2016 aggregating to—

(i) twelve lakh fifty thousand rupees or more, in one or more current account of a person; or

(ii) two lakh fifty thousand rupees or more, in one or more accounts (other than a current account) of a person.
 

(i) A banking company or a co-operative bank to which the Banking Regulation Act, 1949 (10 of 1949) applies (including any bank or banking institution referred to in section 51 of that Act);

(ii) Post Master General as referred to in clause (j) of section 2 of the Indian Post Office Act, 1898 (6 of 1898).]

13 Cash deposits during the period 1st of April, 2016 to 9th November, 2016 in respect of accounts that are reportable under Sl.No.12.

(i) A banking company or a co-operative bank to which the Banking Regulation Act, 1949 (10 of 1949) applies (including any bank or banking institution referred to in section 51 of that Act);

(ii) Post Master General as referred to in clause (j) of section 2 of the Indian Post Office Act, 1898 (6 of 1898).

 

Guidelines for Preparation of Statement of Financial Transactions (SFT)

Specific guidelines for reporting various financial transactions are : 

  • SFT- 001: Purchase of bank drafts or pay orders in cash 
  • SFT- 002: Purchase of pre-paid instruments in cash 
  • SFT- 003: Cash deposit in current account 
  • SFT- 004: Cash deposit in account other than current account 
  • SFT- 005: Time deposit 
  • SFT- 006: Payment for credit card 
  • SFT- 007: Purchase of debentures 
  • SFT- 008: Purchase of shares 
  • SFT- 009: Buy back of shares 
  • SFT- 010: Purchase of mutual fund units 
  • SFT- 011: Purchase of foreign currency 
  • SFT- 012: Purchase or sale of immovable property 
  • SFT- 013: Cash payment for goods and services 
  • SFT- 014: Cash deposits during specified period
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Khush Trivedi
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Category Income Tax   Report

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