The CBDT has introduced new Statement of Financial Transactions (SFT) rules for demat and mutual fund transactions. Depositories and mutual fund RTAs will report detailed transaction data for pre-filling gain, income and loss information in income tax returns. FIFO matches purchases with sales, holding-period rules and estimated sale and cost data determine the pre-filled figures taxpayers must verify before filing.
What changes for Demat Transactions?
Depositories must prepare the prescribed data from their internal systems and submit it to the Income Tax Department.
The SFT-2517 notification states “The Depository transaction summary file will be used for pre-filling the gain/income/loss from securities transactions.”
The transaction summary covers user-initiated debit transactions in a demat account. For an off-market debit, reporting is not required where the transferor and transferee are the same person.
The prescribed security classes include listed equity shares, listed preference shares, listed debentures, zero coupon bonds, listed capital indexed bonds, equity-oriented mutual fund units, units of UTI, units of business trusts, other units, other listed securities and market-linked debentures.
For each sale or debit transaction, the SFT file records information such as the security name, ISIN, debit date, units, sale price, sale consideration, estimated cost of acquisition and whether the asset is short-term or long-term. The data structure also contains fair market value and adjusted cost fields for assets acquired before 1 February 2018.
FIFO will be used to Match Purchases and Sales
The notification states “First in First out (FIFO) method should be used for identification of corresponding credit in demat account and computation of period of holding.”
The holding period is the difference between the acquisition date and sale date. The framework uses that period to classify the asset as short-term or long-term.
For listed equity shares and listed preference shares, the prescribed minimum holding period is 12 months. Equity-oriented mutual fund units also have 12 months. Units of business trusts and other units have 12 months if listed and 24 months if unlisted. Market-linked debentures are treated as short-term capital assets under section 76.
How Sale Value and Cost will be Reported
For depository transactions, the estimated sale consideration is based on the weighted average price taking account of the transaction value.
The notification also states “The taxpayer will be able to modify the sales consideration before filing the return.”
For an exchange purchase made on or after 1 February 2018, the depository uses the weighted average transaction price. For a purchase made before that date, it uses the end-of-day price available with the depository.
For an off-market purchase, corporate action or transaction outside the exchange, the estimated cost is taken as nil for SFT purposes. For an IPO credit, the cost is based on the number of shares allotted multiplied by the allotment price. The taxpayer has the right to change the cost before filing the return.
New Reporting for Mutual Fund Transactions
SFT-2518 notification states that the RTA must prepare the prescribed mutual fund transaction files from its records.
The notification states “The Mutual Fund transaction summary file will be used for pre-filling the gain/income/loss from Mutual Fund transactions.”
The MFT summary covers user-initiated debit transactions during the reporting period. For transfers, information is not required where the transferor and transferee are the same person. The data relating to exchange-traded funds and exchange-based transactions need not be provided under this RTA reporting framework.
For mutual fund transactions, estimated sale consideration is based on the best available price with the RTA. Where sale or transfer consideration is unavailable, the Redemption Offer Price (which is the exit-load-adjusted NAV on the date of sale or transfer) is used.
The taxpayer also gets the right to change the sale consideration before filing the return.
FIFO applies to mutual fund units as well. Equity-oriented mutual fund units carry a 12-month holding period. Other units carry a 12-month holding period if listed and 24 months if unlisted subject to the treatment prescribed for specified mutual funds under section 76 of the Income Tax Act 2025.
What are the Reporting Deadlines?
Both SFT-2517 and SFT-2518 require reporting twice during a financial year.
- For the half-year ending 30 September, the SFT must be furnished by 31 October.
- For the half-year ending 31 March, the SFT must be furnished by 30 April.
For Financial Year 2026-27, this means the first statement is due by 31 October 2026 and the second is due by 30 April 2027.
Pre-Filled Figures Not Final
Depositories and RTAs must also provide the reported information to the account holder to help the taxpayer reconcile it with the Annual Information Statement. If the reporting entity finds an error, it must file a correction or deletion statement.
Investors should know that the Income Tax Department will receive detailed data on sales, estimated cost, FIFO matching and holding period. The taxpayer still remains responsible for the figures entered in the return. Broker statements, demat records, mutual fund statements and acquisition records must be checked before filing.