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Direct Tax Laws and International Taxation · Different Aspects of Tax Planning

Statement of Financial Transaction and Reportable Account under Section 508

Updated 11 October 2026 · Fact-checked

Section 508 of the Income-tax Act, 2025 requires specified persons who register or maintain records of a specified financial transaction or reportable account to furnish a statement to the prescribed authority. Solve questions by identifying the person, the deadline, the defect or default, and then the fee or penalty.

Understand Statement of Financial Transaction and Reportable Account

Tax authorities cannot see every high-value deal on their own. Section 508 solves this by making the people who register or record such deals report them. This is the statement of financial transaction (SFT). It helps the department match what a taxpayer reports with what third parties report.

The duty sits on a listed set of persons: an assessee, a prescribed person in a Government office, a local authority or public body, a Registrar or Sub-Registrar, a motor vehicle registering authority, the Director General under the Post Office Act, 2023, a Collector under the land acquisition law, a recognised stock exchange, an officer of the Reserve Bank of India, a depository, a prescribed reporting financial institution, and any other prescribed person. The duty applies only if the person is responsible for registering or maintaining books or documents recording a specified financial transaction or reportable account, under any law in force.

A specified financial transaction means a transaction, as prescribed, of: purchase, sale or exchange of goods, property or a right or interest in property; rendering any service; a works contract; an investment made or expenditure incurred; or taking or accepting a loan or deposit. The Board may prescribe different values for different transactions and persons. The Act does not fix the value limits, so do not quote any in your answer unless the question gives them.

A reportable account is an account prescribed under the rules. The Act leaves its details to the rules. The statement is filed for the prescribed period, within the prescribed time, in the prescribed form and manner. It goes to the income-tax authority or other authority or agency prescribed.

The Act then builds a compliance chain. If the statement is defective, the authority intimates the defect and you get thirty days to fix it. If you do not file, a notice can be served giving up to thirty days. If you later find an inaccuracy, you must inform the authority within ten days. Each failure has a fee or penalty. For tax planning, this means the reporting is a compliance cost that you must build into process and deadlines.

Key rules to remember

Duty to furnish (section 508(1))
Listed person + responsible for registering or maintaining records of a specified financial transaction or reportable account → furnish statement
The information must be relevant and required for the Act. Period, time, form and manner are prescribed under section 508(2).
Defect in statement (section 508(5) and (6))
Intimation of defect → rectify within 30 days (extendable on application) → if not, treated as inaccurate information
The authority may extend the period at its discretion on an application.
Notice for non-furnishing (section 508(7))
Failure to furnish in time → notice → furnish within a period not exceeding 30 days from service
Penalty under section 454 runs from the day after the notice period ends.
Correcting inaccuracy (section 508(8))
Aware of inaccuracy → inform the authority and furnish correct information within 10 days
Failure can attract the penalty in section 455(1)(a).
Fee for late statement (section 427(3))
₹200 per day of default, not exceeding ₹1,00,000
A fee for failing to furnish within the time prescribed under section 508(2). It is without prejudice to other provisions of the Act.
Penalty for continued failure after notice (section 454)
₹1,000 per day from the day after the notice period expires, not exceeding ₹1,00,000
Applies where the statement is not furnished within the period in the section 508(7) notice. Substituted by Act No. 4 of 2026 w.e.f. 1-4-2026.
Penalty for inaccurate statement (section 455(1))
₹50,000 if inaccurate information is given and correct information is not furnished within the section 508(8) period, or due diligence under section 508(9) is not followed
The authority may direct the penalty.
Additional sum for reporting financial institution (section 455(2))
₹5,000 for every inaccurate reportable account, in addition to the section 455(1) penalty, if any
Applies if the inaccuracy is due to false or inaccurate information furnished by the account holder. The authority shall direct it.

How to solve Statement of Financial Transaction and Reportable Account questions

Use this order for any case question on section 508. It makes sure you cover the person, the default and the consequence.

  1. 1Identify whether the person is within section 508(1) (for example an assessee, Registrar, depository or prescribed reporting financial institution) and whether they register or maintain the relevant records.
  2. 2Check that the item is a specified financial transaction or reportable account as prescribed. If the facts give no value limit, say it is as prescribed.
  3. 3Find the default: not filed, filed late, defective, or inaccurate. Note the dates given.
  4. 4For a defect, apply the 30-day rectification rule. For an inaccuracy discovered later, apply the 10-day rule.
  5. 5For non-filing, apply the fee under section 427(3) and, if a notice was served, the penalty under section 454.
  6. 6For inaccuracy or due diligence failure, apply section 455(1). If the person is a reporting financial institution and the holder gave false information, add section 455(2).
  7. 7Compute each amount separately, apply the cap, and state the total with the section number against each amount.
  8. 8Close with a brief compliance recommendation, such as tracking filing dates and keeping due diligence records.

Quickest way: Default-to-consequence grid

When to use it: Use for MCQs and short numerical questions where you must pick the fee or penalty quickly.

  1. Late with no notice: think section 427(3), ₹200 per day, cap ₹1,00,000.
  2. Notice served and still not filed: think section 454, ₹1,000 per day after the notice period, cap ₹1,00,000.
  3. Inaccurate and not corrected within 10 days, or due diligence failed: ₹50,000 under section 455(1).
  4. Reporting financial institution with inaccurate account due to holder's false information: ₹5,000 per inaccurate account on top.
  5. Defect: 30 days to rectify, then it is treated as inaccurate information.

Common mistakes in Statement of Financial Transaction and Reportable Account

  • Quoting fixed value limits for specified financial transactions.

    Students remember limits from earlier law or practice.

    Fix: State that the transactions and values are as prescribed. Use a limit only if the question gives it.

  • Mixing the ₹200 fee and the ₹1,000 penalty.

    Both are per-day amounts for non-furnishing.

    Fix: The ₹200 fee is under section 427(3) for missing the prescribed time. The ₹1,000 penalty is under section 454 after a section 508(7) notice period expires.

  • Counting the section 454 penalty from the original due date.

    Students assume one continuous default period.

    Fix: Count from the day immediately after the period specified in the notice expires.

  • Forgetting the caps.

    The per-day rate looks open ended.

    Fix: Both the section 427(3) fee and the section 454 penalty are capped at ₹1,00,000. Apply the lower of the computed amount and the cap.

  • Confusing the 30-day and 10-day periods.

    Both are short windows in the same section.

    Fix: 30 days: rectify a defect intimated by the authority, or file after a notice. 10 days: voluntarily correct an inaccuracy you discover.

  • Using old section numbers or the 1961 Act.

    Older notes use different numbering.

    Fix: Use the Income-tax Act, 2025 numbers: 508, 455, 454, 427(3) and, for crypto-assets, 509 and 446.

Worked examples

Example 1

A reporting entity fails to furnish a statement under section 508(1) by the prescribed time. It is late by 400 days when it finally files, and no notice under section 508(7) was served. Compute the fee.

Show the solution
  1. No notice was served, so section 454 does not apply. The fee under section 427(3) applies.
  2. Fee = ₹200 × 400 days = ₹80,000.
  3. The cap is ₹1,00,000. ₹80,000 is below the cap.

Answer: The fee is ₹80,000 under section 427(3).

Example 2

A notice under section 508(7) gave Sundaram Bank Ltd., a reporting financial institution, 30 days to file its statement. It filed 120 days after the notice period expired. Separately, 4 reportable accounts in its filed statement were inaccurate because of false information from account holders, and the bank did not correct them. Compute the penalty under sections 454 and 455.

Show the solution
  1. Section 454: ₹1,000 × 120 days = ₹1,20,000. This exceeds the cap, so the penalty is ₹1,00,000.
  2. Section 455(1)(a): inaccurate information not corrected within the section 508(8) period, so ₹50,000 may be directed.
  3. Section 455(2): ₹5,000 × 4 inaccurate accounts = ₹20,000. This is in addition to section 455(1).
  4. Total = ₹1,00,000 + ₹50,000 + ₹20,000 = ₹1,70,000.

Answer: The total is ₹1,70,000: ₹1,00,000 under section 454, ₹50,000 under section 455(1) and ₹20,000 under section 455(2). Section 427(3) fee may also apply for any delay before the notice.

Exam tips

  • Write the section number next to every amount. Examiners reward correct sections.
  • Draw a short timeline of due date, notice date and filing date before computing days.
  • Always apply the ₹1,00,000 cap and show the comparison.
  • Do not invent prescribed values or the contents of rules. Say 'as prescribed'.
  • Remember that the crypto-asset statement under section 509 has its own penalty in section 446, with ₹200 per day and ₹50,000 rules.

Practice questions from Different Aspects of Tax Planning

Statement of Financial Transaction and Reportable Account: frequently asked questions

Who must furnish a statement under section 508?

The persons listed in section 508(1), such as assessees, Registrars, depositories, stock exchanges and prescribed reporting financial institutions. They must be responsible for registering or maintaining records of a specified financial transaction or reportable account.

What is a specified financial transaction?

It is a prescribed transaction of purchase, sale or exchange of property or goods, rendering service, a works contract, an investment or expenditure, or taking or accepting a loan or deposit. The Board may prescribe different values for different transactions.

What is the time to correct a defect in the statement?

The authority intimates the defect and you have thirty days to rectify it. The authority may extend the period on your application. If you do not rectify, the statement is treated as containing inaccurate information.

What is the penalty for an inaccurate statement?

Under section 455(1), the authority may direct a penalty of ₹50,000 if inaccurate information is not corrected within ten days of becoming aware, or due diligence is not followed. A reporting financial institution may also pay ₹5,000 per inaccurate reportable account in the cases in section 455(2).