Do you know all your big financial transactions are tracked by the Income Tax Department? From large cash transactions in bank accounts to credit card expenses, property purchases and sales and foreign travel – everything is being monitored.
All banks and certain financial institutions are required to file with the Income Tax Department a special report called the Specified Financial Transaction (SFT) return. This report contains details of major financial transactions made by taxpayers. Since the information is linked to taxpayer’s PAN, the tax department can easily track their financial activities and check tax evasion, if any.
The details reported in the SFT by banks, mutual funds, registrars, and other institutions are automatically reflected in the taxpayer’s Annual Information Statement (AIS). These specified institutions are required to submit these details by 31 May of the following financial year.
This year, the last date for filing ITR for Assessment Year (AY) 2025-26 has been extended to 15 September 2025. The government has taken this step so that taxpayers get all the data related to TDS, AIS and SFT on time and they can file returns without any mistake. But here, the most important thing is that the taxpayers show all their transactions correctly. Because once there is a difference between the information recorded in SFT and the information given in your ITR, it will be difficult to avoid heavy penalty and departmental action.
What is SFT and why is it necessary?
The tax department has implemented the SFT system to track certain high-value transactions. Earlier, it was called Annual Information Return (AIR).
CA (Dr.) Suresh Surana explains that, “In accordance with Section 285BA read with Rule 114E of the Income-tax Act, 1961, the Income Tax Department tracks certain high-value transactions through the mechanism of Specified Financial Transactions (SFT) reporting. The obligation to furnish SFT lies with specified reporting entities such as banks, financial institutions, registrars, companies, and other prescribed persons.”
That is, this responsibility does not lie on taxpayers but on banks, financial institutions, mutual fund houses, registrars and other specified entities. These entities report the transactions done in each financial year in Form 61A.
Last date: The last date for filing SFT is 31st May of the next financial year. For example, all reporting for FY 2024-25 was to be done by 31 May 2025.
Which 5 major financial transactions are tracked?
Dr. Surana explains that many transactions are under the department’s eye under SFT. 5 of these big transactions are:
Large cash transactions – Cash deposit/withdrawal of more than Rs 50 lakh annually in one or more current accounts or cash deposit of more than Rs 10 lakh in savings account.
Credit card payments – Payment of more than ₹1 lakh in cash or total payment of more than Rs 10 lakh in a year.
Investment-related purchases – Purchase of shares, mutual funds, debentures, bonds or RBI bonds if exceeding the prescribed limit.
Property transactions – Purchase or sale of any immovable property (such as flat, land) worth Rs 30 lakh or more.
Foreign exchange/travel expenses – Purchase of foreign currency or expenditure of Rs 10 lakh or more on foreign travel.
Information of these transactions goes directly to the department and is then matched with the declared income and expenses of the taxpayers.
These penalties are imposed for non-compliance
According to Dr. Surana, “Failure to furnish SFT: A penalty of Rs 500 per day of default is levied under Section 271FA, increasing to Rs 1,000 per day on expiry of the period of notice… Furnishing inaccurate SFT… penalty of Rs 50,000… For taxpayers: Non-reporting or mismatch … may result in issuance of notices, reassessment proceedings, and addition of income under scrutiny.”
This means that—
For not reporting on time: Penalty of Rs 500 per day.
If there is delay even after notice: It increases to Rs 1,000 per day.
For giving wrong information: Penalty up to Rs 50,000 if not corrected.
Impact on taxpayers: If there is a difference between the declared income and the transactions recorded in the SFT, the department can issue notice, reassess and add it to the income.
Message for taxpayers
It is clear that in today’s time the department keeps an eye on every major transaction. Taxpayers should ensure while filing ITR that—
-The transactions recorded in the SFT match their declared income/investments.
-Keep the required documents (receipts, statements, policy numbers) ready in time.
-File correct and accurate ITR before the last date 15 September 2025.
Summing up…
This ITR filing season is a time for taxpayers to be cautious. With SFT reporting, the department already has the complete data of major financial transactions of taxpayers. In such a situation, any kind of mismatch or reporting mistake can not only lead to heavy fines but can also increase the difficulties of departmental investigation.