SFT Reporting Is Now Mandatory: What the New Income Tax Rules Mean for You

The Income Tax Department has tightened its grip on high-value financial transactions. SFT reporting, previously governed under the older income tax framework, has now been formally strengthened under the Income Tax Act, 2025 and the new income tax rules notified in 2026. 

If you are a bank, NBFC, company, registrar, or insurer, this directly affects your compliance calendar. And if you are a business owner or individual making large transactions, it is equally important to know that your financial activities are being tracked.

What Is SFT Reporting?

SFT stands for Statement of Financial Transactions. It refers to the mandatory reporting of high-value or specified financial transactions to the Income Tax Department by certain designated entities.

Banks report large cash deposits. Mutual fund houses report bulk investment transactions. Property registrars report high-value land deals. All of this data flows into the department’s system, and it eventually shows up in a taxpayer’s Annual Information Statement (AIS) and Form 26AS.

Who Is Required to File SFT?

Not every business needs to file an SFT statement. It applies to specific entities that facilitate certain types of high-value financial transactions. These are called reporting entities under the income tax framework.

The following entities are typically required to register and file:

• Banks and post offices — for cash deposits, withdrawals, and fixed deposit transactions
• NBFCs — for credit card payments and loan disbursements
• Companies issuing shares or debentures — for securities transactions above the threshold
• Mutual fund houses — for purchase transactions
• Property registrars — for immovable property deals
• Insurance companies — for high-value premium receipts
• Foreign exchange dealers — for cross-border money transactions
• Crypto-asset reporting entities (new under the 2026 rules)

Designed for Modern Tax Professionals

A premium filing solution for CAs and tax consultants who need speed, scale, and operational clarity.

• Handle multiple clients with ease
• Reconcile and validate with confidence
• Overcome the limitations of the GST portal

Experience Smarter GST Filing

Which Transactions Are Covered Under SFT?

The updated new income tax rules identify 12 categories of specified financial transactions. Here is a breakdown by type.

1. Cash Transactions in Bank Accounts

2. Fixed Deposits

3. Credit Card Payments

4. Purchase of Shares, Bonds, and Debentures

5. Buyback of Shares

6. Mutual Fund Investments

7. Foreign Exchange Transactions

8. Purchase or Sale of Immovable Property

9. Cash Receipts for Goods or Services

10. Insurance Premium Payments

11. Bank Drafts and Pay Orders Purchased in Cash

12. Crypto Asset Transactions

Key Forms for SFT Reporting Under the New Rules

The updated framework introduces four primary forms for SFT reporting. Each form serves a distinct purpose.

Form 98

Used for reporting transactions involving non-PAN entities. This is filed twice a year — once by 30th April and once by 31st October. It captures transactions where the counterpart has not provided a PAN.

Form 165

This is the main SFT Statement for specified financial transactions. It must be filed by 31st May every year.

Form 166

Used for reporting foreign accounts under FATCA and CRS compliance norms. This is primarily relevant for banks and financial institutions dealing with accounts held by foreign persons or NRIs. Due date is 31st May.

Form 167

Entirely new under the 2026 income tax updates. This form covers crypto-asset transactions and is to be filed by entities that facilitate crypto trading, exchange, or transfer. It marks the formal inclusion of digital assets into India’s SFT reporting framework.

How SFT Data Is Used by the Income Tax Department

Once the SFT statement is filed, the data is processed and matched with the taxpayer’s declared income. This information populates two key documents:

Annual Information Statement (AIS): A comprehensive record of all financial transactions linked to a PAN. Taxpayers can view this in their income tax portal. If an SFT has been filed against their PAN, it appears here.

Form 26AS: The tax credit and financial activity summary. High-value transactions from SFT filings show up here as well.

When a taxpayer files their ITR, the department’s system automatically checks for mismatches between the declared income and the transactions reported through SFT. Unexplained mismatches trigger notices.

This is why SFT reporting matters not just for reporting entities but for taxpayers too. If a transaction is incorrectly reported against your PAN, you need to flag it in the AIS before filing your return.

What This Means for Individual Taxpayers and Business Owners

If you are not a reporting entity, you still need to pay attention to SFT reporting because it directly affects your tax profile.

Say you sold a property worth Rs 55 lakh. The property registrar will file an SFT against your PAN. If you do not declare the capital gains in your ITR, the department will see a mismatch and can send a notice.

Or say your business received cash payments exceeding Rs 2 lakh from a single customer. Your obligation as the receiver is to report this. But even if you do not, the payor’s bank may file an SFT for the cash withdrawal on their end.

The point is that SFT reporting creates a web of cross-reported financial data. For honest taxpayers, it is mostly a non-issue. For those who underreport, it significantly raises the chances of detection. In fact, banks are now required to report cash deposits as part of the savings bank account limits under the new income tax rules.

Frequently Asked Questions on SFT Reporting

1. What is SFT in income tax? 

SFT stands for Statement of Financial Transactions. It is a mandatory report filed by designated entities like banks, NBFCs, and registrars to the Income Tax Department about high-value financial transactions linked to taxpayer PANs.

2. Is crypto reporting included in SFT? 

Yes. Under the new income tax rules 2026, Form 167 has been introduced specifically for crypto-asset reporting. Crypto platforms operating in India are now required to report specified digital asset transactions.

3. What happens if SFT data does not match the ITR? 

The Income Tax Department’s system flags mismatches between SFT data and declared income. This can trigger scrutiny notices or assessments under the Income Tax Act.

Conclusion

The strengthened SFT reporting framework under the new income tax rules 2026 is a clear signal that the Income Tax Department is using data intelligence more aggressively to detect underreporting and tax evasion. For reporting entities, compliance is not optional and the deadlines are firm. For individual taxpayers and businesses, knowing which transactions get reported helps in filing accurate returns and avoiding unnecessary notices.

About the author

Mehul Jagwani

View Profile

Mehul is a seasoned content writer with a passion for simplifying complex accounting and GST topics. With a keen interest in entrepreneurship and business management, he specializes in creating informative and engaging content for themunim.com. His goal is to help businesses understand and implement accounting and GST software solutions effectively. When he's not crafting content, Mehul enjoys exploring new places and spending time with his Golden Retriever.