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Home   »   Government   »   After Note Ban Be Ready for ‘Benami’ Axe

After Note Ban Be Ready for ‘Benami’ Axe

Published on: November 23, 2016 | Updated on: November 8, 2017

benami property

Long queues of people outside banks, ATM centres and post offices for the exchange of notes and withdrawal of money has not dissipated across the country. Hoarders of unaccounted money, ‘hawala’ dealers, drug mafias, fake currency makers and others who have been hit hard by the demonetization move are heaping scorns on Prime Minister Narendra Modi. But wait! This is just the beginning of the drive against those who were running a parallel economy in the country.

The next move will be against ‘Benami’ property owners. A warning in this regard has already been sounded by the Prime Minister when he said: “I am not going to stop at this. I will expose the history of corruption of 70 years since Independence.” With the new Benami Act coming into effect this year from November 1, this warning assumes high significance. From now onward, Benami transactions, if detected, will lead to one to seven years of rigorous imprisonment and penalty which may go to 25 percent of the fair market value of the Benami property.

What is Benami?

A Persian language word, Benami means “no name” or “without any name”. In other terms, a transaction in which the real beneficiary is not the one in whose name a property has been purchased; rather, it is the one who pays the money for that property. In fact, the person in whose name the property is purchased is a mere mask of the real beneficiary.

How Benami Property Can be Identified?

Majorly, three kinds of property do not fall in Benami categories:

1) If a property is in the name of spouse or child for which money has been paid out of the known sources of income.

2) If a property has joint ownership with wife, brother, sister or other relatives and for which money has been paid out of known sources of income.

3) Property purchased by someone in a fiduciary capacity. That means a transaction involving a trustee and a beneficiary.

What Kinds of Assets Fall Under Benami Transaction?

Movable, immovable, tangible, intangible, any right or interest or legal documents — all fall under Benami transaction. Even gold, jewellery or financial securities could fall under Benami transaction.

Who Will be Affected by the Benami Act?

People with slush and unaccounted sources of income will be hugely affected by the Benami Act. However, for common tax payers or the general public, there is nothing to worry so far as their transactions of property or any other assets are legal.

What Encourages the Government to Implement the Benami Act?

Recently, Minister of State for Finance, Santosh Gangwar told the Lok Sabha that the government in its drive to curb the menace of money laundering, stumbled upon numerous properties which were gained through illegal means. He said that during April, 2014 to October, 2016, the Income Tax department conducted searches in 1,242 groups of assessees.

In the course of these searches, the Minister said, officials of the Income Tax department found and seized Rs 2,029 crore worth of undisclosed assets. During the same period, undisclosed amount of Rs 30,001 crore were detected after surveys were conducted on 13,690 individuals.

Who Will Dig Out Benami Property?

The responsibility of finding out Benami property holders will lie on the shoulders of district registrars and land record departments. That means the initiating officer, the approving authority, the administrator and the adjudicating officer, all have to be involved to prove a Benami property.  But then these officers will have to work in coordinated fashion to establish one as Benami property. As per documents available with the government, majority of Benami property holders include a large number of people with white-collar jobs such as doctors and owners of educational institutions.

Will the Real Estate Sector Suffer?

Yes, under the Benami Act, maximum damage will be suffered by the real estate sector. Already, with the aim of making the sector transparent and organized, the Real Estate Regulation and Development Act has been passed by the Parliament, while the Land Acquisition Rehabilitation and Resettlement (Amendment) Bill 2015 is pending before the House for approval. With the implementation of the Benami Act, it will be tough for buyers to purchase property in the name of someone else, a practice which is in the vogue in the real estate sector.

In fact, by hiding unaccounted money from the government, people had been investing in property. They bought property in fictitious names. Secondly, a lot of agricultural property is purchased by real estate sharks or corrupt officials and politicians in the name of somebody else. They will suffer once the currency drive is over and the Benami Act is put for implementation. The central government has hinted that there will be a lot of land inventory available with India after the Benami investigation is launched, probably by next year in January.

This land inventory will be used in fast-tracking the affordable housing plans for the poor.

What is the Relation Between Scam and Benami Property?

There is a perception that whenever a major scam took place in the country, Benami property transactions witnessed a boom. Right from fodder scam to telecom scam to 2G-scam to coal scam and others — each scandal contributed to the growth of Benami property transaction, as huge amounts of money involved in these scams were quickly invested in properties across different states. In Delhi, NCR, Pune, Mumbai and tier II and tier III towns, money gained through scams was used in the purchase of property in unknown names ostensibly with a view to escape the long hand of the law.

Conclusion

After the demonetization move, people planning to invest their money in real estate in the name of their drivers, maids, watchmen or their poor relatives will find themselves in trouble. As such, it is going to be a step which will not only put a curb on the growth of black money, but will also bring a sort of parity in the society on the economic level.

Without high political determination, such things would have been impossible in India which, according to the Berlin-based Transparency International, ranks 76 out of 168 countries in the Corruption Perception Index.

 

Related Links: 

Tourist Season Faces Brunt Of Demonetisation

How to Convert Black Money into White

Modi launches the biggest fight against Fake and Black Money

Modi’s black money haul emerges a Victor

How Will Rs 500, Rs 1000 Note Ban Impact Real Estate?

Spiritual Life Lessons after Note Ban in India

Black Money in India: Causes, Process, Circulation and Solution

Black Money Law: Will it Make a Positive Difference?


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