The Central Board of Direct Taxes (CBDT) notified the Format, Procedure, and Guidelines for submission of Statement of Financial Transactions (SFT) for Dividend income.
Section 285BA of the Income Tax Act, 1961 and Rule 114E requires specified reporting persons to furnish SFT.
For the purposes of pre-filling the return of income, CBDT has issued Notification No. 16/2021 dated March 12, 2021, to include reporting of information relating to dividend income. The new sub-rule 5A of rule 114E specifies that the information shall be furnished in such form, at such frequency, and in such manner, as may be specified by the Director-General of Income Tax (Systems), with the approval of the Board.
“Reporting entities are required to prepare the data file in prescribed format from their internal system. An excel-based report preparation utility has also been provided to assist small reporting entities in preparing data files. The data files prepared by the internal system/report preparation utility should be validated using Text File Validator/Submission Utility. After validation, the text file is required to be compressed, encrypted, and signed using the Text File Submission Utility before uploading on the reporting portal (https://report.insight.gov.in/). Reporting entities, having a large number of data files, can also submit the data files using SFTP Server (specific request may be made for SFTP upload),” CBDT notified.
The statement of financial transactions shall be furnished on or before the 31 st May, immediately following the financial year in which the transaction is registered or recorded.
The statement of financial transaction shall be signed, verified and furnished by the specified Designated Director. Where the reporting person is a non-resident, the statement may be signed, verified and furnished by a person who holds a valid power of attorney from such Designated Director. The data files are required to be uploaded at the reporting portal through the login credentials (PAN and password) of the designated director.
The CBDT has advised the reporting entities to provide information of dividend income, reported to the Income Tax Department, to the taxpayers which will enable them to reconcile the information displayed in the Annual Information Statement (AIS) (Form 26AS).
In case, the reporting person/entity comes to know or discovers any inaccuracy in the information provided in the statement or the defects have been communicated to the reporting person/entity, it is required to remove the defects by submitting a correction/deletion statement.
“The reporting person/entity required to document and implement appropriate information security policies and procedures with clearly defined roles and responsibilities to ensure security of submitted information and related information/documents. The reporting person/entity is also required to document and implement appropriate archival and retrieval policies and procedures with clearly defined roles and responsibilities to ensure that submitted information and related information/documents are available promptly to the competent authorities,” the CBDT added.
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