Two friends met over lunch and ended up discussing ‘specified financial transactions’.

Shubham: Hi, Rahul. What are you doing with all these ₹2,000 notes? Aren’t you aware that the RBI has announced their withdrawal from circulation?

Rahul: Yes, Shubham, I am aware of that. That’s why I am collecting them. I’m going to deposit the notes into my savings account.

Shubham: Oh, got it. But just letting you know that a certain high value amount being deposited in a bank is considered a specified financial transaction. And if there is anything suspicious about it, the taxman can come after you. I hope that is not the case with you.

Rahul: Not at all, man. I’ve got this cash through legitimate sources only. However, what is this specified financial transaction?

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Shubham: SFTs are basically certain high-value transactions made by Indian citizens and entities. Through a statement of financial transactions, the government wants to track these amounts.

Rahul: Okay. So, what sort of transactions qualify for SFT? Can you give some examples? Also, is there any threshold limit?

Shubham: Yes, there are different threshold limits for different kinds of transactions. SFT can include bank-related transactions, such as depositing an amount of ₹10 lakh or more in savings account in a financial year, credit card payments by cash of ₹1 lakh or more.

It can also include other high-value transactions such as the purchase or sale of an immovable property and mutual funds having transaction value of more than ₹30 lakh and ₹10 lakh respectively.

The Income Tax Department has provided a list of 13 such high-value transactions on their website.

Rahul: So, how does the government track them?

Shubham: Whenever a transaction value crosses the threshold limit specified by the Central Board of Direct Taxes, the entities with which you had transacted are supposed to submit the details regarding such high-value transactions to the government.

If you had a transaction with the bank, say, depositing more than ₹10 lakh in your savings account, the bank will submit the details regarding the same to the government. Or if, say, you purchase bonds of more than ₹10 lakh in a financial year, then the company issuing the bond will share the details regarding the same.

Rahul: Oh, okay! But how does this benefit taxpayers like us?

Shubham: See, these SFTs are shown in Form 26AS and Annual Information Statement. As all these are cited in one place, you can recall all your high-value transactions during the assessment year. This can also help you while filing your income tax return, as it prevents any non-disclosure.

Rahul: Okay, understood. Let’s hope that the taxman, through such mechanisms, can identify black money in circulation.

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