SFT Reporting Error Detected; Taxpayers recently receiving advance tax payment notices from the income tax (I-T) department can now breathe a sigh of relief, at least for the moment.
In a recent post on X (formerly Twitter) on March 11, the I-T department announced the discovery of errors in the Significant financial transaction (SFT) data reported in taxpayers’ annual information statements (AIS) for the financial year 2023-24. Due to these errors, taxpayers received notices for advance tax payments significantly higher than anticipated for FY 2023-24.
Explaining the issue, Chirag Chauhan, founder of tax consultancy firm C A Chauhan & Co Chartered Accountants, gave an example: “The value of assets sold has been inflated by two zeroes. For instance, a single share of ITC sold for Rs 450 was reported as Rs 45,000, and property sold for Rs 1.2 crore was shown as Rs 12 crore in the AIS, resulting in a substantial advance tax liability.”
The I-T department, in its post, has advised affected taxpayers to await further updates on their AIS. This means they are not required to take any immediate action on the received intimations.
The Cause of Errors
According to the I-T department’s post, the SFT errors stem from inconsistencies in securities market-related data reported by a reporting entity, which has not been named in the X post.
“In response to feedback from taxpayers on the e-campaign for advance tax, the department has identified certain inconsistencies in the securities market data (SFT-17) provided by one of the reporting entities. The reporting entity has been requested to submit a revised SFT statement based on updated information. Consequently, the AIS data will be revised. Taxpayers are advised to await further updates on AIS based on the revised SFT statement,” the post stated.
Shweta Ajmera, a Chartered Accountant based in Indore, further explains, “A major trading entity submitted its Specified Financial Transaction (SFT) report. Within that, the data for individual share transactions was inflated by 1,000 times. For someone who transacted only Rs 100, the reported data showed Rs 1 lakh.”
As a result, many individuals who had not even transacted above Rs 10 lakh (the threshold for SFT 17 reporting) received SMS messages from the I-T department, asking them to pay advance tax by the March 15, 2024 deadline. Chauhan mentioned that incorrect notices were sent to numerous taxpayers who had sold shares or real estate, urging them to pay advance tax.
Next Steps for Taxpayers
Chauhan suggests that affected taxpayers should ignore these erroneous notices and proceed to pay the correct advance tax amount as per their calculations by the March 15, 2024 deadline. This approach will help avoid any penalties or interest on late advance tax payments.
Ajmera adds, “Those who have not conducted transactions of such high amounts and are not liable to pay advance tax need not panic. The I-T department is actively addressing the issue and has requested the trading entity to rectify the data uploaded into the system.”
In conclusion, taxpayers are advised to stay updated with official communications from the I-T department and act accordingly once further instructions are provided.
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