Income Tax Dept. Launches Crackdown on Non-Compliance in Reporting High Value Transactions

The Income Tax Department has initiated a nationwide enforcement drive to identify and penalise reporting entities that have failed to comply with statutory obligations to file the Statement of Financial Transactions (SFT) and Statement of Reportable Accounts (SRA) for the financial years 2023–24 and 2024–25.

According to senior officials, the Directorate of Systems has flagged a substantial number of entities — including banks, financial institutions, and other specified reporting organisations — that either did not file the requisite statements or submitted incomplete or erroneous data. The compiled list of such non-compliant entities was circulated to field formations by September 30, 2025, for immediate action.

Notices and Penalties Underway

Field offices across the country have now begun issuing statutory notices and imposing penalties on defaulters. The Income Tax Department has instructed its field formations to complete the penal proceedings by the end of November 2025.

“The Directorate of Systems has detected widespread non-compliance by several reporting entities over the last two financial years,” said a senior income tax official on condition of anonymity. “We have initiated the process of issuing notices and recommending penalties as per law. The exercise will be concluded by November-end.”

Officials noted that the non-reported transactions include a variety of high-value activities such as large cash deposits and withdrawals, Luxury vehicle purchases in the names of minor children, Gold purchases, and High-end hotel stays where the bill exceeded ₹50,000.

What Is the SFT and Why It Matters

The Statement of Financial Transactions (SFT) is a mandatory reporting mechanism under the Income Tax Act, 1961, requiring specified entities—such as banks, mutual funds, registrars, and companies—to report details of high-value financial transactions.

These include large cash or digital transactions, interest, dividend, or securities transactions, and property or vehicle purchases.

Transactions involving individuals without a Permanent Account Number (PAN) are also mandatorily reportable to the department.

Cross-Border Reporting Obligations

Alongside SFT compliance, entities are also required to file Form 61B, a Statement of Reportable Accounts (SRA) under Section 285BA of the Income Tax Act. This form specifically pertains to financial accounts held by foreign residents and ensures India’s compliance with international information-sharing agreements like the Foreign Account Tax Compliance Act (FATCA) and the Common Reporting Standard (CRS).