The Central Board of Direct Taxes (CBDT), through the Directorate of Income Tax (Systems), has issued Notification No. 1 of 2026 dated September 10, 2026, prescribing the format, procedure and guidelines for submission of Statement of Financial Transactions (SFT-2517) for Depository Transactions under section 508(1) of the Income-tax Act, 2025, read with sub-rule (6) of rule 237 of the Income-tax Rules, 2026.
The notification forms part of the framework for reporting specified financial transactions by prescribed reporting persons. Section 508 of the Income-tax Act, 2025 and rule 237 of the Income-tax Rules, 2026 require specified reporting persons to furnish Statements of Financial Transactions. The new framework specifically provides for reporting of information relating to capital gains arising from transfer of listed securities or units of Mutual Funds, with a view to facilitating pre-filling of relevant information in taxpayers’ income-tax returns.
In exercise of the powers conferred under sub-rule (6) of rule 237, the Directorate of Income Tax (Systems) has specified detailed guidelines for preparation and submission of the SFT. Annexure A contains guidelines for preparation of the statement, Annexure B lays down the submission procedure, Annexure C provides the format of the Control Statement, while the prescribed data structure and validation rules are contained in Annexures D and E respectively.
Under the notification, all Depositories as defined under section 2(1)(e) of the Depositories Act, 1996 are required to prepare data files in the prescribed format from their internal systems. The reporting entities are required to submit these files through the SFTP server using separately communicated login credentials. A separate Control Statement is also required to be signed, verified and furnished by the Designated Director.
A significant feature of the framework is the introduction of a clearly defined half-yearly reporting cycle. The SFT relating to the first half of the financial year ending 30 September is required to be furnished on or before 31 October, while the statement relating to the remaining half of the financial year ending 31 March is to be furnished on or before 30 April, respectively.
The notification also requires reporting entities to provide the information reported to the Income Tax Department to the concerned account holders. This is intended to enable taxpayers to reconcile the information appearing in their Annual Information Statement (AIS) with the information available with them before filing their return of income.
For preparation of the Depository Transaction Summary, the guidelines provide that information in respect of user-initiated debit transactions in demat accounts will be used for pre-filling gain, income or loss from securities transactions. In the case of off-market debits, reporting is not required where the transferor and transferee are the same person. The estimated sale consideration is to be determined on the basis of the weighted average price, taking into account the actual value of the transaction, while the taxpayer will retain the facility to modify the sale consideration before filing the return.
The guidelines further prescribe classification of securities into specified security classes for determining whether an asset is a short-term or long-term capital asset and the applicable tax treatment. The period of holding is to be determined by identifying the corresponding credit transaction through the First-in-First-out (FIFO) method. The framework prescribes specific minimum holding periods for different categories of securities, including listed equity shares, listed preference shares, listed debentures, units of equity-oriented mutual funds, business trusts and other securities.
Special treatment has also been prescribed for certain instruments. The notification provides, among other things, that a Market Linked Debenture will always be treated as a short-term capital asset for the purposes specified in the guidelines. Certain specified mutual fund units are similarly subject to the treatment set out under section 76 of the Income-tax Act, 2025.
For determination of the estimated cost of acquisition, corresponding credit transactions are to be identified using the FIFO method. Where purchases were made on or after 1 February 2018, the prescribed methodology takes into account the weighted average price, while the guidelines separately deal with securities acquired prior to that date and transactions such as off-market purchases, corporate actions and IPO credits. Taxpayers will be permitted to modify the cost of acquisition before filing their return.
The notification also incorporates the applicable framework for determining the cost of acquisition of certain long-term capital assets acquired before 1 February 2018, including the use of fair market value as on 31 January 2018, subject to the conditions specified in the Income-tax Act, 2025. The Cost Inflation Index is to be used for determining the estimated indexed cost of acquisition wherever applicable.
For comprehensive reporting, the prescribed data structure covers details relating to demat account holders, opening and closing values, market credits and debits, off-market credits and debits, IPO credits, corporate actions, dematerialisation and rematerialisation transactions, and pledge invocation transactions. The framework also requires security-level transaction summaries for sales/debits and separate reporting of off-market transactions.
The notification provides an in-built mechanism for ensuring data quality. Files that do not meet prescribed validation requirements may be rejected. Where an uploaded statement requires modification, the reporting entity is required to furnish a Correction Statement containing the records requiring correction, while deletion of previously uploaded data is to be undertaken through a prescribed deletion request.
Reporting persons and entities are also required to put in place appropriate information-security, archival and retrieval policies and procedures, with clearly defined roles and responsibilities, so that submitted information and related records remain secure and can be made available promptly to competent authorities. Where any inaccuracy or defect is subsequently discovered or communicated, the reporting entity is required to rectify it through a correction or deletion statement, as applicable.
The validation framework classifies issues into Errors, Defects and Exceptions. These include control-statement mismatches, incorrect sequence numbering, non-reporting of account-summary data for reported transactions, blank mandatory fields, invalid PANs, excessive values and mismatches detected after comparison with other submitted data.
The notification has been issued with the approval of the CBDT and comes into effect from the date of its issue. The new reporting framework is expected to promote standardised reporting of depository transactions and improve the availability and quality of transaction-level information required for pre-filling and reconciliation of capital-gains related information in income-tax returns.
The Notification can be accessed at: https://www.incometaxindia.gov.in/documents/d/guest/notification_1_sft-pdf
