SFT-2518: Mutual Fund SFT Reporting Rules Explained

SFT-2518: Mutual Fund SFT Reporting Rules Explained

Regulatory Reference: CBDT Notification No. 2/2026 / DGIT(S)/ADG(S)-2/Reporting Portal/2026/769
Authority: Directorate of Income Tax (Systems), Central Board of Direct Taxes (CBDT), Ministry of Finance, Government of India
Effective Date: September 2026
Statutory Provisions: Section 508(1) of the Income-tax Act, 2025 read with Sub-rule (6) of Rule 237 of the Income-tax Rules, 2026

Executive Summary & Statutory Framework

Under Section 508(1) of the Income-tax Act, 2025 and Rule 237 of the Income-tax Rules, 2026, specified reporting entities are required to furnish a Statement of Financial Transactions (SFT) to the Income Tax Department.

This comprehensive notification sets out the exact procedure, data structures, validation rules, and compliance standards for Registrar and Share Transfer Agents (RTAs) registered under Section 12(1) of the Securities and Exchange Board of India (SEBI) Act, 1992.

Primary Purpose

The data captured under SFT-2518 directly populates capital gains information for taxpayer pre-filling in Income Tax Returns (ITRs) and feeds into Form 168 (Annual Information Statement – AIS). This allows taxpayers to view and reconcile their mutual fund sales, redemptions, off-market transfers, and acquisition costs prior to filing their annual tax returns.

Core Administrative & Compliance Requirements

1. Eligible Reporting Entities

All RTAs registered with SEBI under Section 12(1) of the SEBI Act, 1992 are mandated to prepare and upload data files extracted directly from their internal systems.

2. Reporting Frequency & Due Dates

SFT reporting for Mutual Fund transactions operates on a half-yearly basis:

3. Submission Channel & Authorization

• Data Transmission: Files must be uploaded via the dedicated Secure File Transfer Protocol (SFTP) Server using login credentials issued directly by the Income Tax Department (ITD).
• Control Statement Verification: A separate physical/digital Control Statement (Annexure C) must be signed, verified, and submitted by the entity’s Designated Director.

4. Data Rectification & Security Mandates

• Correction & Deletion Statements: If an RTA identifies errors or receives a defect notice from the department, it must rectify the data by submitting a Correction Statement (containing only corrected records) or a Deletion Request.
• Information Security & Archival Policies: Reporting entities must maintain strict information security protocols, role-based access controls, and archiving/retrieval workflows to ensure data integrity and provide immediate access to competent authorities upon request.
• Taxpayer Transparency: RTAs are required to provide account holders with statement details corresponding to the data submitted to the Income Tax Department to facilitate seamless AIS reconciliation.

Detailed Data Preparation Guidelines (Annexure A)

Scope of Inclusions & Exclusions

  INCLUDED TRANSACTIONS                 EXCLUDED TRANSACTIONS
┌───────────────────────────────┐     ┌───────────────────────────────┐
│ • User-initiated debit events │     │ • Exchange Traded Funds (ETFs)│
│ • AMC Redemptions & Swapping  │     │ • Exchange-based transactions │
│ • Off-market transfers        │     │ • Transfers where transferor  │
│ • Transmission on death       │     │   and transferee are identical│
└───────────────────────────────┘     └───────────────────────────────┘

1. User-Initiated Debits: Reporting applies to all user-initiated debit transactions recorded during the period. Transfers where the transferor and transferee are the same individual/entity are excluded.
2. Minors: In accounts held by minors, the legal or natural guardian’s information (Name, PAN, etc.) must be provided.
3. Excluded Categories: Exchange Traded Funds (ETFs) and stock exchange-executed mutual fund transactions do not fall under this RTA reporting scope.

Holding Periods & Asset Classification Logic

RTAs must apply the First In, First Out (FIFO) method to match each debit transaction with its corresponding historical credit (purchase) to determine the holding period.

Holding Period = Date of Sale / Transfer - Date of Acquisition

Classification Table & Thresholds

> 24 Months (Unlisted) | Listed on a recognized Indian stock exchange = 12 months. Unlisted = 24 months.
If classified as a Specified Mutual Fund under Sec 76, it is always Short-Term. |

Consideration & Cost Computation Methodology

1. Estimated Sale Consideration: Determined using the best available price with the RTA. If exact consideration is unavailable, the Redemption Offer Price (NAV adjusted for Exit Load) on the transaction date must be used.
2. Cost of Acquisition (COA): Identified on a FIFO basis. If acquisition cost is unavailable, the End-of-Day (EOD) NAV on the date of credit is applied.
3. Grandfathering Mechanism (Pre-Feb 1, 2018 Assets):
   For Long-Term Equity-Oriented Funds or Business Trust units acquired before February 1, 2018, the cost of acquisition is calculated pursuant to Section 90(9) as:

COA = max (Actual COA, min (FMV as on 31.01.2018 or Full Sale Consideration))

4. Indexation: Estimated Indexed Cost of Acquisition must be calculated using the official Cost Inflation Index (CII) wherever legally applicable.

Complete Data Structure Specifications (Annexure D)

All files must be submitted in ASCII format, delimited by the pipe character (|), with a header row as the first record.

Data Structure Architecture:
├── MF_BATCH.TXT        (Header batch metadata & Principal Officer info)
├── MF_ACC_SUMM.TXT     (Client demographic & seasonal holding balances)
├── MF_TRN_SUMM.TXT     (Individual debit/sale calculations & tax attributes)
└── MF_OFF_TRN.TXT      (Off-market transfers & transmission details)

File 1: Batch Header File (MF_BATCH.TXT)

File 2: Account Summary File (MF_ACC_SUMM.TXT)

File 3: Transaction Summary File (MF_TRN_SUMM.TXT)

File 4: Off-Market Transactions File (MF_OFF_TRN.TXT)

Technical Reference Charts & Codes

1. Permissible Values

Statement Types (Statement Type)

• NB: New Batch/Statement containing fresh information.
• DB: Deletion Batch/Statement for removing previously accepted data.
• CB: Correction Batch/Statement updating previously submitted records.

Correction Reason Codes (Reason for Correction)

• A: Original statement contained severe formatting errors now resolved.
• B: Errors in original statement being updated suo-motu.
• C: Supplemental report submitted due to newly discovered information.
• 4: Not applicable (used for new statements, test uploads, or nil reports).
• Z: Other unspecified business reasons.

Off-Market Transfer Reason Codes (Reason Code)

• TRD: Transmission (change in holding resulting from the death of an account holder).
• OTH: Other off-market transfers.
• ZZZ: Reason not specified.

2. Standard Indian State & UT Codes

AN : Andaman & Nicobar       HR : Haryana                PB : Punjab
AP : Andhra Pradesh          HP : Himachal Pradesh       RJ : Rajasthan
AR : Arunachal Pradesh       JK : Jammu & Kashmir        SK : Sikkim
AS : Assam                   JH : Jharkhand              TN : Tamil Nadu
BR : Bihar                   KA : Karnataka              TS : Telangana
CG : Chhattisgarh            KL : Keralam                TR : Tripura
CH : Chandigarh              LA : Ladakh                 UP : Uttar Pradesh
DD : Dadra & Nagar Haveli    LD : Lakshadweep            UK : Uttarakhand
     and Daman & Diu         MP : Madhya Pradesh         WB : West Bengal
DL : Delhi                   MH : Maharashtra            
GA : Goa                     MN : Manipur                
GJ : Gujarat                 ML : Meghalaya              
                             MZ : Mizoram                
                             NL : Nagaland               
                             OR : Odisha / Orissa        
                             PY : Puducherry             

3. Historical Cost Inflation Index (CII) Table

Indexed Cost of Acquisition = (Actual COA x CII for Transfer Year) / CII for Acquisition Year

Data Validation & Error Handling Architecture (Annexure E)

The ITD validation engine reviews incoming files against three strict validation tiers:

                      INCOMING SFT DATA FILE
                                │
                                ▼
                   ┌──────────────────────────┐
                   │  1. SYSTEM ERROR CHECKS  │
                   └────────────┬─────────────┘
                                │
                  ───────┬──────┴──────┬───────
                 │                     │
                 ▼                     ▼
          [CRITICAL ERROR]     [DEFECT / EXCEPTION]
                 │                     │
                 ▼                     ▼
         File REJECTED         File ACCEPTED
         • Control Total       • Missing fields
           mismatch            • Invalid PAN format
         • Sequence jump       • Outlier valuation
                 │                     │
                 ▼                     ▼
         Fix & Re-upload       Submit Correction
                                    Statement

1. Errors (Critical – Causes File Rejection)

If a critical error occurs, the entire file is rejected instantly. The RTA must fix the source data and re-upload the file via SFTP.

• Control Statement Mismatch: Calculated header sums in Annexure C do not equal the record tallies in the batch file.
• Broken Line Sequences: Non-sequential or duplicate line numbers within any text file.

2. Defects (Non-Critical – File Accepted)

The system accepts the batch, but marks targeted records for correction.

• Unlinked Transactions: A debit record exists in MF_TRN_SUMM.TXT without corresponding client master demographic data in MF_ACC_SUMM.TXT.
• Blank Mandatory Fields: Key mandatory fields omitted.

3. Exceptions (Data Quality Warnings – File Accepted)

Triggers warnings requiring institutional review and potential Correction Statement submission.

• Invalid PAN Data: Structurally invalid PAN strings.
• Valuation Anomalies: Abnormally high transaction values exceeding department flag limits.
• Cross-Data Mismatches: Discrepancies identified when cross-referenced against historical filings or external financial databases.

Annexure C: Control Statement Form (RTA Mutual Fund SFT)

================================================================================
                    CONTROL STATEMENT FOR MUTUAL FUND TRANSACTIONS (RTA)
================================================================================

A. GENERAL INFORMATION
--------------------------------------------------------------------------------
A.1  Reporting Entity Name        : ____________________________________________
A.2  ITDREIN                      : ____________________________________________
A.3  SEBI Registration Number     : ____________________________________________
A.4  Statement Type (NB/CB/DB)    : _____
A.5  Statement Number             : ____________________________________________
A.6  Original Statement ID        : ____________________________________________
A.7  Reason for Correction        : _____
A.8  Statement Date (DD-MM-YYYY)  : ____/____/________
A.9  Reporting Period Start Date  : ____/____/________
A.10 Reporting Period End Date    : ____/____/________

B. RECORD COUNT SUMMARY
--------------------------------------------------------------------------------
B.1  Mutual Fund Batch File (MF_BATCH.TXT)               : ____________ Records
B.2  Mutual Fund Account Summary (MF_ACC_SUMM.TXT)       : ____________ Records
B.3  Mutual Fund Transaction Summary (MF_TRN_SUMM.TXT)   : ____________ Records
B.4  Mutual Fund Off-Market Transaction (MF_OFF_TRN.TXT) : ____________ Records

C. KEY VALUE TOTALS (In ₹ - Derived from MF_ACC_SUMM.TXT)
--------------------------------------------------------------------------------
C.1  Sum of Opening Value         : ₹ __________________________________________
C.2  Sum of Purchase Value        : ₹ __________________________________________
C.3  Sum of Sale Value            : ₹ __________________________________________
C.4  Sum of Closing Value         : ₹ __________________________________________

================================================================================
                                VERIFICATION
================================================================================
I, ___________________________________, in my capacity as Designated Director of 
__________________________________________, do hereby declare that to the best 
of my knowledge and belief, the information provided in the attached data files 
is true, correct, and complete, and is fully compliant with the provisions of 
the Income-tax Act, 2025 and Income-tax Rules, 2026.

Date  : ____/____/________
Place : __________________                         _____________________________
                                                   Signature of Designated Director
================================================================================

Notification

Also Read: SFT – 2517: Depository Transaction Reporting, Due Dates & Key Guidelines

Also Read: “CBDT Notifies New Forms PAN CR-01 & PAN CR-02 for PAN Correction from 1 April 2026”

Also Read: FAQs and Guidance notes on Forms under Income-tax Rules, 2026

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