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Section 508 Income Tax Act 2025: Who Must File SFT and Reportable Account Statements?

Section 508 establishes the legal duty to report specified financial transactions and reportable accounts. It identifies reporting persons, provides for prescribed filing rules, and sets out procedures to address defective, missing or inaccurate statements.

Legal position: The Income-tax Act, 2025 applies from 1 April 2026. Section 508 should be read with the applicable Income-tax Rules, 2026 and notifications, which determine reportable categories, monetary thresholds, forms and filing dates. Not every financial transaction is automatically reportable.

What is the purpose of Section 508?

The provision creates a third-party information reporting framework. Prescribed reporting persons submit information concerning specified financial transactions or reportable accounts recorded or maintained by them. Such information helps the Income Tax Department verify financial disclosures and administer the Act.

Who is required to furnish a statement under Section 508(1)?

The statutory categories include an assessee; prescribed officers of government offices; local authorities and public bodies; Registrars and Sub-Registrars; motor vehicle registering authorities; the specified postal authority; land acquisition Collectors; recognised stock exchanges; officers of the Reserve Bank of India; depositories; prescribed reporting financial institutions; and other prescribed persons responsible for registering or maintaining records of specified transactions or reportable accounts.

The obligation depends on the statutory category and applicable rules. Merely being an individual taxpayer does not mean every personal transaction must be separately reported under this section.

Relevant statutory definitions

Specified financial transaction - Section 508(3): A prescribed transaction involving purchase, sale or exchange of goods, property or property interests; services; works contracts; investments or expenditure; or taking or accepting loans or deposits.
Reportable account: An account required to be identified and reported under the applicable reporting and due diligence framework prescribed for reporting financial institutions.
Reporting person: A person or institution within Section 508(1) that is required by the relevant rules to report transactions or accounts.
Board: The Central Board of Direct Taxes, which may prescribe different transaction values for different reporting persons under Section 508(4).

How and when must the statement be filed?

Section 508(2) requires reporting for the prescribed period, within the prescribed time, in the prescribed form and manner. The specific form, reporting thresholds and deadlines are determined by the rules applicable to the particular reporting entity and transaction. Reporting entities should verify the current form and filing instructions rather than assume a single deadline applies to all statements.

What if a statement is defective, missing or inaccurate?

Defective statement - Sections 508(5) and (6)

If the prescribed income-tax authority identifies a defect, it may intimate the filer and allow 30 days from the date of intimation to rectify it. An extension may be granted on application. An unrectified defect is treated under the Act as furnishing inaccurate information.

Failure to file - Section 508(7)

If a required statement is not filed within the specified time, the prescribed authority may issue a notice requiring filing within a period not exceeding 30 days from service of the notice.

Discovery of inaccuracy - Section 508(8)

A filer who becomes aware of an inaccuracy must inform the prescribed authority or agency and furnish correct information within 10 days, in the prescribed manner.

Registration and due diligence - Section 508(9)

The Central Government may prescribe registration, record maintenance and due diligence requirements for identifying reportable accounts.

What are the consequences of non-compliance?

Non-filing, inaccurate reporting or non-compliance with a notice may attract applicable statutory consequences. Relevant provisions include Section 427 (fee for default in furnishing statements), Section 454 (penalty for failure to furnish a statement after notice), and Section 455 (penalty for inaccurate statement). Verify the applicable statutory conditions and amounts before drawing conclusions about a particular default.

Practical example

Suppose a prescribed financial institution records a transaction that falls within a category and monetary threshold notified for reporting. The institution must include the required particulars in its statement for the applicable period. If it subsequently discovers incorrect account details, it must follow the correction process under Section 508(8). The example is illustrative; actual reporting depends on the prescribed rules.

Frequently asked questions

Does every taxpayer have to file an SFT?

No. Filing obligations apply to persons covered by Section 508(1) and the relevant prescribed reporting requirements.

Can different transactions have different reporting thresholds?

Yes. Section 508(4) permits different prescribed values for different transaction categories and reporting persons.

What is the time limit for correcting an inaccurate statement?

Section 508(8) requires notification and correction within 10 days after the filer becomes aware of the inaccuracy.

What is the corresponding provision in the Income-tax Act, 1961?

Section 285BA of the Income-tax Act, 1961 dealt with the obligation to furnish statements of financial transactions or reportable accounts.

Key takeaway: Section 508 is a reporting provision, not a blanket tax on transactions. Whether a particular transaction must be reported depends on the reporting person, the prescribed category, value and rules.

Official legal reference

For the statutory text, consult the Income-tax Act, 2025 (official PDF). For forms and filing services, visit the Income Tax e-Filing Portal.

Updated: 12 November 2026. This article provides general legal information and is not a substitute for transaction-specific professional advice.