New Income Tax Rules for High-Value Transactions: SFT Reporting Made Mandatory

The Income Tax Department has strengthened compliance requirements for Reporting of Specified Financial Transactions (SFT) under the Income Tax Act, 2025 and Rules, 2026. The latest framework aims to enhance transparency, widen the tax base, and track high-value financial activities across India.

Issued by the Directorate of Income Tax (Intelligence & Criminal Investigation), the updated guidelines mandate reporting entities to disclose specified transactions through structured forms such as Form 98, Form 165, Form 166 and Form 167.

What is SFT Reporting?

Specified Financial Transactions (SFT) refer to high-value transactions conducted by individuals or entities that must be reported to the Income Tax Department by designated reporting entities such as banks, companies, NBFCs, registrars, and insurers.

The objective is to:

• Detect tax evasion
• Monitor financial activities
• Ensure better compliance
• Expand the taxpayer base

Who Must Report?

Any entity involved in specified financial transactions must:

• Register on the reporting portal
• Obtain an Income Tax Department Reporting Entity Identification Number (ITDREIN)
• File relevant forms electronically

Key Due Dates for Filing

Major Reportable Transactions (SFT Categories)

The department has identified 12 categories of reportable financial transactions, including:

Banking & Cash Transactions

• Cash deposits/withdrawals ≥ Rs 50 lakh (current account)
• Cash deposits ≥ Rs 10 lakh (savings accounts)
• Cash payments for bank drafts/pay orders ≥ Rs 10 lakh

Credit Card Transactions

• Rs 1 lakh or more in cash payments
• Rs 10 lakh or more via other modes annually

Investments & Securities

• Purchase of shares, bonds, debentures ≥ Rs 10 lakh
• Buyback of shares ≥ Rs 10 lakh
• Mutual fund transactions (reported separately via APIs)

Property Transactions

• Purchase/sale of immovable property ≥ Rs 45 lakh
• Based on stamp duty valuation

Foreign Exchange Transactions

• Forex spending ≥ Rs 10 lakh (with PAN)
• Rs 5 lakh (without PAN)

Insurance Premiums

• Rs 10 lakh+ annually (with PAN)
• Rs 5 lakh (without PAN)

Other Transactions

• Cash receipts for goods/services exceeding Rs 2 lakh
• Purchase of stamp papers above specified thresholds

Forms Breakdown

Form 165 (SFT Statement)

Divided into 4 parts:

• Part A: Reporting entity details
• Part B: Person-based reporting
• Part C: Account-based reporting
• Part D: Property transactions

Form 166

Used for reporting foreign accounts under FATCA/CRS compliance

Form 167

Applicable for crypto-asset reporting entities, covering reportable crypto transactions

Additional Reporting Requirements

Separate reporting mechanisms exist for:

• Dividend income
• Interest income
• Share market transactions (API-based reporting)

Penalties for Non-Compliance

Failure to file SFT can lead to strict penalties:

• Rs 500 per day for delay after due date
• Rs 1,000 per day after notice period
• Rs 50,000 penalty for inaccurate reporting

Additionally:

• Defects must be corrected within 10 days (self-identified)
• Department-detected errors must be fixed within 30 days

Rectification & Compliance Support

Reporting entities must:

• Correct errors immediately upon detection
• File revised or correction statements
• Use official helpdesk and portal tools for compliance

Why This Matters

The strengthened SFT framework reflects the government's push toward:

• Digital tax intelligence
• Real-time transaction tracking
• Improved financial transparency

Taxpayers and businesses must ensure proper documentation and compliance to avoid scrutiny and penalties.