Exclusive: After demonetisation, Narendra Modi sets sights on benami properties, deals

It may not be a happy new year for benami property holders. Come 2017 and Income Tax (I-T) sleuths may be knocking at their doors. And if proved a "benamidar" (benami property holder), one is likely to face rigorous imprisonment from one year up to seven years.

Prime Minister Narendra Modi has given enough indications on various occasions about his intention to combat the black money menace in India by adopting stringent actions against people involved in benami properties and transactions.

And, to make it successful, unlike in the past, the Modi government has already cleared the ground making amendments in the original Benami Transaction (Prohibition) Act, 1988.

 Exclusive: After demonetisation, Narendra Modi sets sights on benami properties, deals

Representational image. Reuters

The provisions of the amended act came into force on 1 November 2016. It has given more teeth to the I-T Department to get cracking on benami properties and transactions, with a comprehensive tracking, identifying and finally taking stringent action against offenders.

Looking back at the Benami Transaction Act

More than two decades ago, in 1993-94 and 1994-95, two alternative budgets were presented by Delhi-based Citizens' Parliament comprising 230 eminent citizens, including politicians from diverse political parties barring the Congress and the BJP.

The author of the two budgets was Professor Arun Kumar, a noted economist who holds authority on black money. The former professor of Economics at Jawaharlal Nehru University (JNU) had suggested levying wealth tax and property tax on all properties.

“Nothing much has happened in taking action against benami property holders since 1988, when the Benami Transaction Act came into being. We had suggested in our alternative budget to levy wealth tax and property tax on all properties above 25 square yard (20.9 square metres). This will bring every property under the tax net," Kumar told Firstpost.

“According to my estimate, 62 percent of our GDP — that is Rs 93 lakh crore is the black economy. Given the situation, identifying the benami property holders is a tough job. Will the tax department be able to do it?” said Kumar.

Amended Benami Transaction Act

The legal framework for dealing with benami transactions in the old Benami Transactions Act was weak and nothing much was achieved. Now, the amended act empowers the I-T Department to inquire into any person, place, documents or property during an investigation into any matter related to a benami property transaction.

“The amendments have made the act stricter. Apart from imprisonment and penalty up to 25 percent, the benami property will be confiscated. The property rights would go directly to the Centre, and the government can make use of the property as it wishes purportedly to help rural development plans. Now action will be taken against both the actual owner and the property holder under a bogus name," a senior I-T official said.

The benamidars invest black money in buying land and houses through multiple channels and use bank accounts of different people. The real owner always remains unidentified. From politicians to bureaucrats — properties like land and flats are bought by floating bogus companies in the name of other people while the actual face behind benami transactions get away unnoticed, untracked.

"It was not easy to track the unknown entities in the past. But after the introduction of permanent account number (PAN) and filing of I-T Returns, the tax department has been able to collect information. Now, information from property registration office, online registration records, Annual Information Report filed with the tax department, the municipal corporation record, etc, have made tracking easy. The amended Benami Transactions Act will make escaping tougher for offenders. Punishment is now stringent," said chartered accountant Abhishek Aneja.

What is an offence under the new Benami Transactions Act?

Any transaction made under a fictitious name; transaction made without the knowledge of the owner; person who owns the property is not traceable; amount paid to buy property from an unknown source; on records the owner is another person, whereas benefits go to the one who paid for the property yet doesn't show up in the record of the purchase will be considered a benami.

Benami transactions could be a property or any other asset — movable, immovable, tangible, intangible, any right or interest, or legal documents. Gold or finance securities, stocks and shares can also fall under benami transaction if the requirements mentioned in the act are not met.

However, property held in the name of spouse or children, paid from known source or joint ownership of property with siblings or relatives, paid from known source — are exempted.

Tracking mechanism to be used
According to sources at the Central Board of Direct Taxes (CBDT), increasingly it’ll be immensely difficult for those having benami properties or going for benami transactions to escape from I-T radar.

The tax authority now has new tools to track benami property holders. Besides, 360-degree profiling of people who file tax returns, the Intelligence and Criminal Investigation wing of the Income Tax at CBDT receives information from multiple sources such as Financial Intelligence Unit (FIU), banks, Registrar of properties, annual information report (AIR) from banks, hotels, grand weddings, tours and travel agencies, high-value purchases like house, cars, jewellery, consumer durables, payments made through cards, and from transactions that attract tax collected at source (TCS) and tax deducted at source (TDS).

The database prepared from the information gathered by collating manual and electronic intelligence goes to the data warehouse unit for analysis. A new Non-Filers Management System (NMS) matches the data being obtained from various sources.

“The non-intrusive surveillance capabilities of the I-T Department have been enhanced. There is a huge database with the I-T Department. Parameters have been set to select cases automatically. Based on it, the creditworthiness of the owner of a property is also matched with the I-T returns. The crackdown will be on all those who have been avoiding paying taxes and show their actual income," a CBDT source said.

“Though it’s tough and challenging for the I-T Department to determine legal and illegal holdings, it’s not impossible now, unlike in the past. The government might also come up with a scheme giving the benami property holders a chance to voluntary declare their hidden assets. In case that happens, and a person doesn’t comply and is caught later, he/she will face stringent punishment,” the source added.

Updated Date: Dec 23, 2016 09:02:18 IST