The Central Board of Direct Taxes (CBDT), through the Directorate of Income Tax (Systems), has notified the format, procedure and guidelines for submission of the Statement of Financial Transactions (SFT) for mutual fund transactions by Registrars and Share Transfer Agents (RTAs).
The notification has been issued under Section 508(1) of the Income-tax Act, 2025, read with Rule 237(6) of the Income-tax Rules, 2026. The framework is aimed at providing transaction information for the pre-filling of income and capital gains details in taxpayers' income-tax returns.
What the CBDT Notification Covers
Under the notified framework, specified reporting persons are required to furnish SFT information containing details relating to capital gains on the transfer of mutual fund units.
The CBDT has prescribed separate guidelines covering:
- Preparation of the SFT
- Submission procedure
- Control statement requirements
- Data structure
- Validation rules
- Correction and deletion of previously submitted information
The notification also contains separate annexures dealing with these requirements.
RTAs Required to Submit Mutual Fund SFT Data
All Registrars and Share Transfer Agents registered under Section 12(1) of the SEBI Act, 1992 are required to prepare the prescribed data file from their internal systems.
The reporting entities have to submit the data files through the SFTP server using login credentials communicated separately. In addition, a separate control statement has to be signed, verified and furnished by the Designated Director.
SFT to Be Filed Twice a Year
The notification provides for half-yearly reporting of mutual fund transactions.
The SFT for the first half of the financial year, ending on 30 September, is required to be furnished on or before 31 October. The SFT for the second half, ending on 31 March, is required to be furnished on or before 30 April.
This means RTAs will have two reporting cycles every financial year to ensure that relevant mutual fund transaction information is communicated to the Income Tax Department.
Mutual Fund Data to Help Taxpayers Reconcile AIS
The reporting requirement is also linked to the information taxpayers see in their Annual Information Statement (AIS).
According to the notification, reporting entities are required to provide account holders with information relating to mutual fund transactions that has been reported to the Income Tax Department. This will help taxpayers reconcile the information appearing in their AIS (Form 168).
This could make the reconciliation of mutual fund transactions and capital gains information more structured when taxpayers prepare their income-tax returns.
How Mutual Fund Transactions Will Be Reported
The guidelines state that the Mutual Fund Transaction Summary will be used for pre-filling gain, income or loss arising from mutual fund transactions.
The transaction summary is required for user-initiated debit transactions during the reporting period. However, information is not required for transfers where the transferor and transferee are the same person.
For minors, details of the legal or natural guardian may also be provided. The guidelines further state that data relating to exchange-traded funds and exchange-based transactions may not be provided.
FIFO Method to Determine Holding Period
One of the important aspects of the prescribed framework is the use of the First In First Out (FIFO) method.
For each debit transaction, the corresponding credit transaction is to be identified using FIFO. The holding period is then determined based on the difference between the acquisition date and sale date.
The guidelines require securities to be classified into the prescribed security classes for determining whether an asset is short-term or long-term and for applying the relevant rate.
Minimum Holding Period
The notification specifies the following classification framework:
| Security Class | Description | Minimum Holding Period |
|---|---|---|
| EMF | Unit of Equity Oriented Mutual Fund | 12 months |
| UTI | Unit of UTI Mutual Fund | 12 months |
| OTU | Other Units | 12 months if listed / 24 months if unlisted |
The notification clarifies that the term listed refers to securities listed on a recognised stock exchange in India. It also provides specific treatment for units qualifying as a Specified Mutual Fund under Section 76 of the Income-tax Act, 2025.
Estimated Sale Consideration and Cost of Acquisition
For a debit transaction, the estimated sale consideration is to be determined using the best possible available price with the RTA.
Where sale consideration for a sale or transfer is not available, the Redemption Offer Price, adjusted for exit load and based on the NAV on the date of sale or transfer, may be used.
Importantly, the taxpayer will have the ability to modify the sales consideration before filing the income-tax return.
Similarly, the estimated cost of acquisition for the corresponding credit transaction is to be determined using the best available price with the RTA. If the cost is unavailable, the end-of-day NAV on the date of credit may be considered. The taxpayer can modify the cost of acquisition before filing the return.
Information to Be Captured in Mutual Fund Account Summary
The prescribed MF Account Summary file will contain details of the person and summary values of financial transactions during the reporting period.
Among other fields, the data structure requires information relating to:
- Financial year and reporting period
- AMC name and code
- Client ID and PAN
- Client name and type
- Client status
- Guardian details, where applicable
- Address and contact details
- Joint holding details
- Opening value
- Purchase value
- Transaction charges
- Stamp duty
- Sale value
- STT
- Dividend paid
- Closing value
Transaction-Level Reporting for Mutual Fund Sales
A separate Mutual Fund Transaction Summary (MF_TRN_SUMM.TXT) is prescribed for security-level transaction information relating to sales or debits during the reporting period.
The file includes details such as the client's PAN and name, security class, security code, security name, debit date, debit and credit type, asset type, units sold or transferred, unit price, sale consideration and cost of acquisition.
Additional fields include the fair market value as on 31 January 2018, adjusted FMV, adjusted cost of acquisition, indexed cost of acquisition wherever applicable and STT.
Off-Market Mutual Fund Transactions Also Covered
The framework separately provides for reporting of off-market mutual fund transactions recorded by the RTA during the year.
The prescribed file captures information about the transferor and transferee, their PAN and client IDs, the security involved, quantity transferred, reported consideration, end-of-day unit price, estimated transaction value and the reason for the transfer.
The prescribed transaction reason codes include Transmission, relating to a change in holding following the death of a holder, along with other specified categories.
Correction and Deletion Mechanism
The notification also provides a mechanism for correcting or deleting information already submitted.
If a reporting entity needs to modify uploaded data, it has to file a Correction Statement, containing only the records requiring correction. Where previously uploaded data needs to be deleted, a Deletion Request is required.
The prescribed statement types include:
- NB – New Batch containing new information
- CB – Correction Batch containing corrections to previously submitted information
- DB – Deletion Batch
Validation Checks for SFT Submission
The CBDT has also prescribed validation rules for the files submitted by reporting entities.
Errors are categorised into errors, defects and exceptions. While errors may result in rejection and defects require correction and resubmission, exceptions are to be reviewed by the reporting entity and addressed wherever necessary.
Examples of validation issues include:
- Mismatch in control statement values
- Incorrect sequence numbers
- Client data not provided for a reported transaction
- Blank mandatory fields
- Invalid PAN
- Excessive values reported
- Mismatch with other submitted data
Information Security and Record Retention
RTAs and other reporting entities are required to put in place appropriate information security policies and procedures with clearly defined roles and responsibilities.
They must also maintain appropriate archival and retrieval policies so that submitted information and related documents can be made available promptly to the competent authorities when required.
CBDT Notification Effective From Date of Issue
The CBDT notification states that the prescribed framework will come into effect from the date of issue. It has been issued with the approval of the CBDT.
Key Takeaway
The new SFT framework creates a structured reporting mechanism for mutual fund transactions carried out through RTAs. By prescribing standardised transaction files, FIFO-based matching, capital-gain classification, correction procedures and validation checks, the framework is designed to support more consistent reporting and pre-filling of mutual fund-related income and capital gains information in income-tax returns.
For taxpayers, the requirement to provide reported mutual fund information for reconciliation with AIS (Form 168) is particularly relevant. For RTAs, the notification introduces detailed data, filing, validation, correction and information-security requirements that need to be incorporated into their reporting processes.
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