The Union Budget 2023 imposed penalty of Rs. 5,000 for Inaccuracy in Statement of Financial Transactions (SFT) submitted by Prescribed Reporting Financial Institution and the proposed is amendment is to take effect from 1st April, 2023.
A Statement of Financial Transaction is a report of particular financial transactions by persons including prescribed reporting financial institutions. Such specified persons who maintain such specified financial transactions are under a mandate to submit SFT to the income tax department. SFT consists of particular high-value transactions financially undertaken by citizens that the Government proposes to track, with an intent to reduce black money and increase the tax base in India.
Clause 114 of the Finance Bill seeks to amend the section 27 IFAA of the Income tax Act relating to penalty for furnishing inaccurate statement of financial transaction or reportable account. The said section provides for imposition of penalty of fifty thousand rupees on a person for furnishing inaccurate information in the statement of financial transaction or reportable account.
The Union Budget proposed to amend the said section to provide that the income-tax authorityimposing penalty under the said section shall be the same as the income tax authorityprescribed under sub-section (l) of section 285BA.
It is further proposed to insert a new sub-section (2) in the said section to providethat the reporting financialinstitution shall, in addition to the penalty under sub-section (l), if any, pay a sum of fivethousand rupees for every inaccurate reportable account.
The Income-tax department requires a notified taxpayer, including prescribed financial institutes, to submit a statement of specified financial transactions during a financial year. Such notified taxpayers who maintain, register, or record such specified financial transactions, are mandated to submit a statement of such financial transactions (SFT) to the income tax authority or such other specified agency or authority.
This step was undertaken by the Government and ministry of finance to curb the black money and widen the tax base.Such specified financial transactions are submitted to the authority in the form of a statement under Form 61A.
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