In a series of assaults against the rampant flow of ‘black money’ in the country, the Modi government’s new target is the ‘Benami Property’. First introduced in 1988, and amended in the years, 2011 and 2016 – the Benami Transactions (Prohibition) Act, 1988 seeks to curb the ecosystem in which black money thrives in this country, through bypassing income taxes. In Himachal, last Saturday, Prime Minister Modi alluded to the government’s attempts to seize, and paralyze the presence of illegal assets in the country.
‘Benami Property’, which means ‘no name’ in South Asian dialects refers to the kind of transactions where properties or items are bought under the name of a third party and not the financial benefactor, even though the latter remains the owner of the property. The act of buying real estate and other commodities under the name of one’s family members such as the owner’s parents, spouse, or child has long been prevalent in India. This legal loophole till this point offered an easy escape route for black money holdings by allowing them to skip the income tax department’s radar. The presence of this act helps the government to identify the actual owners of a property and charge the person’s unaccountable income source.
The Prohibition of Benami Property Transaction Act
This act was implemented on the 1st of November, 2016. Its predecessor in 1988, which was introduced for a similar effect in mind had little effect on the system. The revised Act was passed after careful examination of the current economic climate. This bill enables the tax department to confiscate any ‘Benami’ property, and also impose severe punishments on the ‘Benamidaar’ (A person who owns a Benami property). Benamidaars, or anyone involved in the transactions of a benami property can face up to seven years in jail, along with a fine of up to 25% of the market value of the ‘Benami’ property.
Not just real estates, but assets such as gold, or diamonds can also be considered as Benami properties. Gold, and precious stones, which are considered as items of financial securities in Indian families are always the de facto commodities for turning black money into white, by black money hoarders. The government of India has so far implemented the Undisclosed Foreign Income and Assets (Imposition of Tax) Act and the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015, along with the Benami Property Act, in its war against black money and corruption.
The Modi Government announced on 26th July 2017 in Rajya Sabha that till now, around 800 crores worth of properties is under the radar of the government, which has been suspected of being guilty under this Act. Further, the income tax department has already confiscated 541 properties and frozen bank accounts of several defaulters. Religious Trust holdings would, however, be exempted from such monitoring. Since 2016, the government has so far established 24 Benami Prohibition Units (BPUs) to monitor transactions, in accordance with the Benami Property Act. Whether the Benami Property Act would be any more successful than it’s predecessors remains to be seen.
Liked this article? Read more about the government’s black money policy here.