Introduction
From 1 April 2026, the Income-tax Act, 2025 and Income-tax Rules, 2026 apply for Tax Year 2026-27 onwards.
One important compliance change is the expanded reporting framework for Statement of Financial Transaction, or SFT, under the new rules.
Earlier, high-value transaction reporting was mainly understood as PAN-based reporting. Under the new framework, where PAN is not available, certain reportable transactions are still captured separately with lower thresholds for persons not having PAN.
This does not mean every Aadhaar-linked transaction automatically becomes taxable. It means that certain high-value transactions may be reported to the Income Tax Department even where PAN is not available.
For ITR filing, AIS review and income tax notice support, visit TaxClear.in.
What Is SFT?
SFT means Statement of Financial Transaction.
It is a reporting mechanism where specified entities report material financial transactions to the Income Tax Department.
Examples of reporting entities include:
- banks;
- co-operative banks;
- post offices;
- authorised foreign exchange dealers;
- stock holding agencies;
- registrars/sub-registrars;
- insurers;
- mutual funds;
- companies issuing securities.
Under the old law, SFT was filed in Form 61A. Under the Income-tax Rules, 2026, Rule 237 provides for SFT reporting in Form No. 165 for specified transactions.
Why This Matters for Taxpayers
If a transaction crosses the SFT threshold, the reporting entity may report it to the Income Tax Department.
That transaction may later appear in:
- AIS;
- TIS;
- compliance portal;
- pre-filled data;
- notice or e-campaign query, where mismatch exists.
Therefore, taxpayers must keep source-of-funds proof for large deposits, foreign currency purchases, stamp paper purchases and other high-value transactions.
Important Correction: It Is Not “Tax on Aadhaar”
This rule does not impose tax merely because Aadhaar is used.
The correct position is:
| Wrong Understanding | Correct Understanding |
|---|---|
| Aadhaar transaction itself becomes taxable | No, taxability depends on income/source |
| Every Aadhaar transaction is reported | No, only specified reportable transactions are covered |
| Notice will automatically come in every case | No, reporting may lead to verification if mismatch exists |
| PAN absence means transaction is invisible | No, non-PAN cases have separate reporting thresholds |
| SFT reporting means tax evasion | No, it is only information reporting |
Main Transactions Discussed
The transcript focuses on three major transactions:
- cash deposits in savings/post office accounts;
- foreign currency or forex card purchase;
- stamp paper purchase.
Let us understand each one carefully.
1. Cash Deposit in Savings Bank or Post Office Account
Under Rule 237, cash deposits in one or more accounts other than current accounts and time deposits are reportable if they cross the prescribed limit.
SFT Limit for Cash Deposit
| Case | SFT Reporting Threshold |
|---|---|
| Person having PAN | ₹10 lakh or more in a financial year |
| Person not having PAN | ₹5 lakh or more in a financial year |
| Account type | One or more accounts other than current account and time deposit |
| Reporting person | Bank/co-operative bank/post office |
The official Rule 237 table provides ₹10 lakh threshold for a person having PAN and ₹5 lakh threshold for a person not having PAN for cash deposits in non-current, non-time-deposit accounts.
Example
| Particulars | Amount |
|---|---|
| Cash deposited in savings account | ₹6 lakh |
| PAN available? | No |
| SFT reporting? | Yes, because it exceeds ₹5 lakh threshold for non-PAN case |
If the same person had PAN, the reporting threshold would be ₹10 lakh.
2. Foreign Currency / Forex Card Purchase
SFT reporting also applies to receipt from any person for sale of foreign currency, including:
- credit to foreign exchange card;
- expense in foreign currency through debit card;
- expense in foreign currency through credit card;
- traveller’s cheque;
- draft;
- any other instrument.
SFT Limit for Foreign Currency / Forex Card
| Case | SFT Reporting Threshold |
|---|---|
| Person having PAN | ₹10 lakh or more in a financial year |
| Person not having PAN | ₹5 lakh or more in a financial year |
| Reporting person | Authorised person under FEMA |
Rule 237 provides these thresholds for sale of foreign currency, including credit to forex card and expenses in foreign currency through debit/credit card or other instruments.
Example
| Particulars | Amount |
|---|---|
| Foreign currency / forex card purchase | ₹6 lakh |
| PAN available? | No |
| SFT reporting? | Yes |
If a person has PAN, reporting generally triggers at ₹10 lakh or more in a financial year.
3. Purchase of Stamp Paper
A new important entry under the 2026 SFT framework is purchase of stamp paper.
SFT Limit for Stamp Paper Purchase
| Case | SFT Reporting Threshold |
|---|---|
| Person having PAN | ₹2 lakh or more in one transaction |
| Person not having PAN | ₹1 lakh or more in one transaction |
| Reporting person | Stock Holding Corporation of India Limited |
Rule 237 specifically covers purchase of stamp paper and provides separate thresholds for persons having PAN and persons not having PAN.
Example
| Particulars | Amount |
|---|---|
| Property value | ₹20 lakh |
| Stamp duty assumed | 6% |
| Stamp paper value | ₹1.20 lakh |
| PAN available? | No |
| SFT reporting? | Yes, because stamp paper purchase exceeds ₹1 lakh |
This does not mean the stamp duty itself is income. It means the transaction may be reported, and the taxpayer should be able to explain the source of funds for the property transaction.
Key SFT Limits Under Rule 237
| Transaction | With PAN | Without PAN | Reporting Entity |
|---|---|---|---|
| Cash deposit in savings/post office-type accounts | ₹10 lakh or more in FY | ₹5 lakh or more in FY | Bank/post office |
| Foreign currency / forex card / foreign currency expense | ₹10 lakh or more in FY | ₹5 lakh or more in FY | Authorised person under FEMA |
| Stamp paper purchase | ₹2 lakh or more in one transaction | ₹1 lakh or more in one transaction | Stock Holding Corporation of India Ltd. |
| Immovable property transaction | ₹45 lakh or more / stamp duty value ₹45 lakh or more | Same reporting entry | Registrar/Sub-Registrar |
Rule 237 also covers immovable property transactions where the amount or stamp duty value is ₹45 lakh or more.
How Does the Department Use This Data?
The reporting entity files the SFT. The Income Tax Department then uses the data for matching and risk analysis.
The transaction may be compared with:
- ITR income;
- AIS/TIS;
- Form 168 / tax credit data;
- bank deposits;
- property records;
- cash source;
- foreign travel or remittance data;
- business turnover;
- past return filing profile.
If the transaction appears inconsistent with declared income, the taxpayer may receive a compliance query or notice.
Will Every Reported Transaction Lead to Notice?
No.
SFT reporting does not automatically mean notice.
A notice may arise where:
- the transaction is large compared to reported income;
- the taxpayer did not file ITR;
- cash source is unexplained;
- AIS shows transaction but ITR does not explain it;
- PAN/Aadhaar identity mismatch exists;
- property purchase source is not clear;
- foreign currency purchase is inconsistent with income profile.
Practical Example: Cash Deposit
Mrs. A deposits ₹7 lakh cash into a savings account during the year. PAN is not linked with the account.
| Question | Answer |
|---|---|
| Is the deposit automatically taxable? | No |
| Is it reportable? | Yes, if covered by Rule 237 threshold |
| What should she keep? | Cash source proof |
| What if source is explained? | No tax issue merely due to deposit |
| What if source is unexplained? | Tax and penalty risk may arise |
Practical Example: Stamp Paper Purchase
Mr. B buys stamp paper worth ₹1.25 lakh for a property transaction but does not provide PAN.
| Question | Answer |
|---|---|
| Is stamp paper purchase income? | No |
| Can it be reported? | Yes |
| What may department ask? | Source of funds for property |
| What documents should be kept? | Sale deed, bank trail, loan sanction, gift deed, savings proof |
Practical Example: Forex Card Purchase
A person buys ₹6 lakh worth of foreign currency/forex card without PAN.
| Question | Answer |
|---|---|
| Is foreign currency purchase taxable? | No |
| Is it reportable? | Yes, if threshold crossed |
| What should be maintained? | Travel documents, bank trail, source of funds |
| What risk exists? | Mismatch if income shown is very low |
Documents to Keep for These Transactions
| Transaction | Documents to Keep |
|---|---|
| Cash deposit | Cash book, withdrawal proof, sale bill, gift deed, loan proof |
| Savings/post office deposit | Bank statement, source of funds |
| Forex card/foreign currency | Travel tickets, visa, bank payment proof, forex invoice |
| Stamp paper purchase | Stamp duty receipt, property agreement, bank trail |
| Property purchase | Sale deed, loan sanction, source of margin money |
| Gift-funded transaction | Gift deed, donor PAN, donor bank statement |
| Business cash deposit | Sales register, invoices, GST records, cash book |
| Agricultural cash source | Land records, mandi receipts, sale bills |
What Taxpayers Should Do Now
Taxpayers should not panic, but they should become more disciplined.
Action Plan
| Step | Action |
|---|---|
| 1 | Link and update PAN wherever available |
| 2 | Avoid using non-PAN routes for reportable transactions |
| 3 | Keep source proof for large cash deposits |
| 4 | Use banking channels where possible |
| 5 | Check AIS and TIS before filing ITR |
| 6 | Reconcile large transactions with ITR |
| 7 | Maintain gift deeds and loan documents |
| 8 | Do not ignore compliance notices |
| 9 | File ITR if income/transaction profile requires it |
| 10 | Take professional advice for unexplained cash/property cases |
For AIS review and income tax notice support, visit TaxClear.in.
Common Mistakes to Avoid
| Mistake | Risk |
|---|---|
| Thinking no PAN means no reporting | Wrong under new framework |
| Depositing large cash without source proof | Notice risk |
| Buying stamp paper without source trail | Property source query |
| Treating SFT report as tax demand | SFT is information, not tax demand |
| Ignoring AIS/TIS | Mismatch notice |
| Not filing ITR despite high-value transactions | Compliance query |
| Using minor accounts without proper records | Source explanation issue |
| Not keeping gift deed | Unexplained credit risk |
| Claiming cash came from savings without proof | Weak explanation |
| Responding casually to notice | Penalty/litigation risk |
Minor Account Cases
The transcript also refers to minor accounts.
Where a minor does not have PAN, transactions should not be routed casually. Source should be properly documented.
For minors, the source may be:
- parent’s transfer;
- gift from relatives;
- scholarship;
- inheritance;
- bank interest;
- sale of minor’s asset.
Proper records should be maintained because clubbing and guardianship rules may also apply.
Does Aadhaar-Based Reporting Replace PAN?
No.
PAN continues to be the primary tax identification number for income tax purposes.
The key practical point is:
If PAN is not available, the transaction may still be reportable under non-PAN thresholds, and identity details may be captured through available KYC information.
Therefore, taxpayers should not assume that transactions without PAN are invisible.
TaxClear View
The new SFT framework under Income-tax Rules, 2026 makes reporting more data-driven.
The most important corrections are:
- savings/post office cash deposit threshold is ₹10 lakh with PAN and ₹5 lakh without PAN;
- forex/foreign currency threshold is ₹10 lakh with PAN and ₹5 lakh without PAN;
- stamp paper threshold is ₹2 lakh with PAN and ₹1 lakh without PAN;
- reporting does not automatically mean tax;
- source of funds matters.
Taxpayers should focus on documentation and proper ITR disclosure.
Key Takeaways
- SFT means Statement of Financial Transaction.
- Rule 237 of Income-tax Rules, 2026 provides SFT reporting in Form No. 165.
- Cash deposits in savings/post office-type accounts are reportable at ₹10 lakh with PAN and ₹5 lakh without PAN.
- Foreign currency/forex card transactions are reportable at ₹10 lakh with PAN and ₹5 lakh without PAN.
- Stamp paper purchase is reportable at ₹2 lakh with PAN and ₹1 lakh without PAN.
- Immovable property transactions of ₹45 lakh or more are also reportable.
- SFT reporting is information reporting, not automatic tax.
- Transactions may appear in AIS/TIS.
- Taxpayers should keep source-of-funds proof.
- Non-PAN transactions are not invisible.
- Proper ITR filing and documentation are the best protection against notices.
Conclusion
From 1 April 2026, high-value transaction reporting under the Income-tax Rules, 2026 will become more structured. Transactions such as cash deposits, forex purchases and stamp paper purchases can be reported even where PAN is not available, with separate lower thresholds.
This does not mean every such transaction is taxable. It means the Income Tax Department may receive information and may ask for an explanation if the transaction does not match the taxpayer’s income profile.
Keep documents, avoid unexplained cash, update PAN/KYC and reconcile AIS before filing ITR.
For ITR filing, AIS/TIS reconciliation, cash deposit explanation, property source planning and income tax notice reply, visit TaxClear.in.
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