Weeks after Indian Prime Minister Narendra Modi announced the demonetization of Rs 500 and Rs 1000 notes to curb black money generation in the nation, PMO is all set for their next attack against corruption and this time it’s ‘Benami Properties’ that are going to come under the scanner.
During the recent and the last for 2016 ‘Mann Ki Baat’ session PM Narendra Modi said “We will take action against ‘benami’ property. This is major step to eradicate corruption and black money… We are going to take action against the properties which are purchased in the name of others (benami). That is the property of the country”.
PM Modi has received huge criticism after the demonetization drive, as opposition on several occasions has pointed out that cash only amounts to 6% of the actual black money and a huge part is stashed in real estate and bullions. However, PMO’s take over benami properties will definitely silence the criticism as the government has already enacted the Benami Transactions (Prohibition) Amendment Act, 2016 according to which, violators will be subjected to an imprisonment of up to seven years and a fine upto to 25% of the fair market value of property.
However, after witnessing the confusion triggered by demonetization of high value currency notes, we thought of sharing the in and out Benami Transactions (Prohibition) Amendment Act, who will come under the scanner and how does it work?
What is a Benami Property?
Benami Property is an interesting concept and has been used to generate and camouflage the actual black money since decades. In layman terms, suppose a person wants to invest his black money in real estate. He will pay the actual sum but the property wouldn’t be register on his name rather it will be registered on the name of his, say sister, any other relative or even a staff. So, despite being the purchaser and paying the respective consideration, he will not be the actual owner and in some cases, the actual owner is not even aware of the fact.
According to the Benami Transaction (Prohibition) Amendment Act 2016, a property is deemed to be a bemani property if any of the following conditions are satisfied:
1. When the owner and the purchaser are not the same.
2. Purchasing of property on a fictitious name.
3. The owner denies of the ownership or the purchase of the property in question.
4. When the payer can no longer be traced.
However, there are some exceptions:
1. When a property is purchased on the name of an unmarried daughter or wife.
2. If the property is purchased with joint funds of wife, children, siblings etc and the funds are traceable, it won’t be marked as a benami property.
3. If the property has been declared in 2016 Income Declaration scheme, it could no longer be questioned.
These are some of the most common exceptions and for further details, check the Benami Transaction (Prohibition) Amendment Act 2016.
How does Benami Transactions affect the Economy?
To avoid taxes, several black money holders infuse the illegal money in real estate sector by buying benami properties in the names of family and friends. As a large chunk of black money is involved in the process, it leads to extraction of currency from the economy resulting low level of revenue generation and hampering of growth and development in the state.
The process leads to more corruption as related authorities are involved in making illegal transactions and government further fails to successfully implement its policies.
Continuing the fight against corruption and making India stand against other economically stronger countries, PMO will need to take critical steps regarding the Benami Transaction (Prohibition) Amendment Act 2016 and if this drive turns in favour of Indian Government, we will definitely see more scams and violators unveiled in the coming future.
However, considering the problems that people have faced during the demonetization drive, many fear that this will lead to more misery among the middle class.
Meanwhile, PM Narendra Modi has thanked people for enduring the ‘pain’ caused in last few weeks and asked for their support in the fight against benami properties.
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26 December 2016
Rohan Jaitly