Mutual funds not required to report investments over ₹10 lakh in new draft rules: Details here

The Draft Income-tax Rules 2026 circulated by the Income-tax Department propose to free mutual funds of the requirement to report any investments worth ₹10 lakh or more in a financial year by an investor.

Under the existing Income-tax Rules, a trustee of a mutual fund or such other person managing the affairs of the mutual fund is required to report investments worth ₹10 lakh or more in a financial year to the income-tax department.

In the proposed draft income-tax rules, there is no such provision for reporting of high-value investments in mutual funds. However, reporting is proposed in case of the following market-linked instruments:

• Buy back of shares worth ₹10 lakh or more in a financial year from any person (other than the shares bought in the open market).

• Receipt of ₹10 lakh or more in a financial year from a person for acquiring shares (including share application money) issued by a company.

• Receipt of ₹10 lakh or more in a financial year from any person for acquiring bonds or debentures issued by a company or institution (other than the amount received on account of renewal of the bond or debenture issued by that company)

The above three transactions are also required to be reported under the existing rules.

Please note that the draft rules are currently open for public feedback and they may see some changes before final implementation with effect from April 1, 2026.

How are certain transactions reported and why?

The Income-tax laws allow the tax department to keep a watch on certain high-value transactions undertaken by taxpayers. This is done with the help of the statement of financial transaction (SFTs) or reportable account.

The SFT is required to be filed by certain prescribed entities, and it includes details of specified financial transactions or any reportable account registered, recorded, or maintained by them during the year.

The information furnished in SFTs helps the Income-tax Department track of specified financial transactions carried out by a person during the year.

Under the Income-tax Act 1961, the provisions related to SFTs are provided under Section 285BA. In the new Income-tax Act 2025, these provisions are covered under Section 508(1).