May 31 SFT cut-off: A small SFT error could create big ITR problems - here's what to watch for

As the May 31 deadline for filing the Statement of Financial Transactions (SFT) approaches, tax experts are urging taxpayers to review their financial records carefully. Errors such as incorrect PAN details, duplicate transaction entries, or wrongly reported values by banks, mutual funds, and other financial institutions can create mismatches in tax records and potentially complicate Income Tax Return (ITR) filing.

What is SFT?

The Statement of Financial Transactions (SFT) is a reporting mechanism under Section 285BA of the Income-tax Act. Through Form 61A, specified entities report certain financial transactions to the Income Tax Department. These disclosures help tax authorities verify whether taxpayers have correctly reported income and investments in their ITRs.

Banks, non-banking financial companies (NBFCs), post offices, mutual fund trustees, forex dealers, registrars, and companies issuing dividends or buying back shares are among the entities required to submit SFT reports.

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May 31 deadline

Reporting entities must file SFTs annually by May 31 following the end of the financial year. The data reported through SFT feeds into taxpayers' Annual Information Statement (AIS), a key document used by the Income Tax Department during return processing.

Since the department cross-verifies ITR disclosures with information available in AIS and other databases, any discrepancy can trigger notices, refund delays, or requests for clarification.

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Common errors

According to officials, analysis of SFT filings has identified several recurring issues. These include duplicate reporting of transactions, incorrect transaction values, and missing or wrong PAN details. Such mistakes can result in inaccurate information appearing in taxpayers' AIS.

The risk of reporting errors is often higher in cases involving joint bank accounts or jointly held investments, where transaction values may be incorrectly attributed to one holder. Officials have also highlighted inadequate reconciliation processes, weak internal controls, and delayed reporting as common shortcomings among reporting entities.

Impact on your ITR

Even if a taxpayer has filed returns correctly, incorrect SFT reporting can create mismatches between reported income and tax department records. This could lead to intimation notices, delayed refunds, additional verification requirements, or, in some cases, returns being flagged as defective.

Tax professionals warn that correcting such discrepancies can be time-consuming because it often requires financial institutions to revise their SFT submissions.

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What taxpayers should note

Experts recommend downloading and reviewing the Annual Information Statement (AIS) and Form 26AS before filing returns for Assessment Year 2026-27. Taxpayers should verify details relating to interest income, dividends, mutual fund transactions, securities trades, and property transactions.

If any discrepancy is found, it should be reported through the Income Tax portal or raised with the concerned institution at the earliest. A clean AIS can help ensure smoother return filing and reduce the risk of notices or refund delays.

With the Income Tax Department already enabling online filing of ITR-1, ITR-2, and ITR-4 forms for Assessment Year 2026-27, taxpayers have a limited window to reconcile records before the July 31 filing deadline.