Last reviewed: 24 September 2026. Two CBDT notifications dated 10 September 2026 quietly expanded what your depository and mutual fund house report about you: SFT-2517 for depository (demat) transactions and SFT-2518 for mutual fund transactions, both now with transaction-level detail and, for mutual funds, FIFO-based tracking. If you invest in shares or mutual funds, more of your activity is about to show up in your Annual Information Statement (AIS) than before – and a mismatch between what you file and what shows there is one of the most common triggers for an automated notice.
What SFT-2517 and SFT-2518 actually report
| Statement | Filed by | What it covers |
|---|---|---|
| SFT-2517 | Depositories (NSDL/CDSL, via participants) | Transactions in your demat account, with mandatory digital verification of the filing |
| SFT-2518 | Mutual fund houses/RTAs | Purchase, redemption and switch transactions, tracked transaction-by-transaction with FIFO (first-in-first-out) methodology applied to identify which units were redeemed |
Neither of these is a new tax or a new deduction – they are reporting obligations on the institutions holding your investments, not on you. What changes for you is simply that more of your trading and investment activity now flows automatically into the data the tax department already cross-checks against your return.
Why FIFO tracking in SFT-2518 matters for your capital gains
When you redeem mutual fund units bought in multiple tranches (a SIP is the classic example – dozens of purchase dates, one redemption), the holding period and cost of acquisition for capital gains purposes depends on which units are treated as sold. FIFO means the earliest-purchased units are treated as redeemed first. If your own capital gains computation used a different assumption, or if your broker/RTA statement summarised things differently, the AIS entry generated from SFT-2518 may not match your workings line for line.
Worked example. An investor ran a SIP into an equity fund from April 2023, then redeemed a partial holding in August 2026. Under FIFO, the units purchased in April-June 2023 are treated as sold first – likely qualifying for long-term capital gains treatment (holding period over 12 months for equity funds). If the investor's own return computed the gain using average cost instead of FIFO-identified lots, the reported capital gains figure and the AIS-driven figure can diverge, inviting a mismatch flag even though no tax was actually evaded.
Where Section 194K fits – and where it does not
Section 194K requires a mutual fund to deduct 10% TDS on income distributed to a resident unit holder (dividend/income-distribution-cum-capital-withdrawal payouts), where the aggregate in a financial year exceeds ₹5,000. This is a separate, long-standing provision – it is not part of the new SFT-2517/2518 reporting and has not changed with this notification. The reason to mention it here: both the 194K TDS entry and the new SFT-2518 transaction data appear in the same AIS view, and conflating "TDS was deducted so my reporting is done" with "my capital gains and income are fully reconciled" is a mistake we see every filing season.
| Item | What it is | Changed by this notification? |
|---|---|---|
| Section 194K TDS | 10% TDS on MF income distribution over ₹5,000/FY | No – unchanged, pre-existing provision |
| SFT-2518 | Transaction-level MF reporting with FIFO tracking | Yes – new reporting format, notified 10 Sept 2026 |
| SFT-2517 | Demat transaction reporting with digital verification | Yes – new reporting format, notified 10 Sept 2026 |
What to actually do before you file
- Download your AIS and Form 26AS close to your filing date, not months in advance – SFT data can post with a lag, and an early download may miss entries.
- Reconcile every mutual fund redemption against your own capital gains statement (most RTAs/fund houses issue one) rather than relying on memory or a single consolidated broker statement.
- If a redemption's holding period or gain in the AIS looks different from your own working, check whether a FIFO assumption explains the gap before assuming an error on either side.
- Keep Form 16, 26AS and AIS reconciled together as a single pre-filing step, not three separate checks done at different times.
- If capital gains from mutual funds or shares this year are substantial, revisit your capital gains computation for shares and mutual funds against the FIFO-based AIS figures before finalising your return.
- Where 194K TDS has been deducted, confirm it is correctly reflected as tax credit in your return – it reduces your final tax payable, it does not substitute for reporting the underlying income or capital gains.
Frequently asked questions
Do SFT-2517 and SFT-2518 mean I now owe more tax?
No. These are reporting formats for institutions, not new taxes. Your tax liability is unchanged by the reporting mechanism itself; what changes is how much of your transaction detail the department can see and cross-check automatically.
My AIS shows a mutual fund gain figure different from my own calculation. What should I check first?
Check whether FIFO-based lot identification under SFT-2518 explains the difference – particularly for SIP or staggered-purchase holdings redeemed partially. Reconcile against your fund house's own capital gains statement before assuming either figure is wrong.
Does Section 194K TDS mean my mutual fund income does not need to be reported separately?
No. TDS under Section 194K is a tax credit against your final liability; you still report the underlying income/capital gain in your return. Failing to report it just because TDS was deducted is a common, avoidable error.
Who actually files SFT-2517 and SFT-2518 – do I have to do anything?
Depositories (via participants) file SFT-2517 and mutual fund houses/RTAs file SFT-2518. You do not file these yourself; your only action is to reconcile the resulting AIS/26AS entries against your own records before filing your return.
When did this reporting requirement start?
The notifications (System notifications 01/2026 and 02/2026) are dated 10 September 2026. Check your AIS closer to your filing date to see the transaction data actually reflected, since reporting and portal reflection can lag the notification date.
Does this affect equity share trading through my demat account too?
SFT-2517 covers depository (demat) transactions generally, so equity share transactions in your demat account are within its scope, separate from mutual fund transactions reported under SFT-2518.
We reconcile Form 26AS, AIS and your investment statements before filing, and handle any mismatch notice that follows.
Income Tax Filing Income Tax Notice Management Talk to usThis article summarises SFT-2517/2518 (notified 10 September 2026) and Section 194K as understood on the date of review. General information, not advice on your specific facts – confirm details against the current forms/portal and consult us or your tax advisor before acting. CA Somesh Chandak & Associates, FRN 158694W.