Benami property raid : The next big score to settle!

Benami property raid : The next big score to settle!

After demonetization, just when people thought that this is the ultimate bummer they could face, PM Modi threatened black money mafia for even bigger and tougher steps to curb their ever growing tentacles that have been plundering the nation since independence.

The New Benami Act prohibits illegal benami or unnamed transactions for which you can face imprisonment of seven years and penalty. It is essentially people buying property with their black money but not under their own name. The property belongs to the one who paid for it but the benamidar or the person whose name is used while buying remains at the forefront when it comes to showing paperwork.

What goes into the list of benami?

1. Transactions made under fictitious name.

2. Transactions made without the knowledge of the owner.

3. The person who owns the property is not traceable.

4. Amount paid for the property purchase form an unknown source.

5. The owner is another person but the benefits go to the one who paid for the property yet show no records of the purchase.

The following are exempted from benami prohibitions

1. Property held in the name of spouse or children, paid from known source.

2. Joint ownership of property by with siblings or relatives, paid from known source.

3. Someone in a fiduciary capacity (involving a trustee and a beneficiary).

Benami transactions

Benami transactions could be of 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 above mentioned requirements are not met.

How will that help?

Tracking down illegal, hidden transactions would mean crackdown on all who have long been neglecting the importance to pay taxes and show their actual income. Black money raid will see new dawn as people who have a lot of illegal purchase to stash away illegal earnings will be caught and made to face the consequences. It will indeed be a tough nut to crack for the income tax department to determine legal and illegal holdings but not an impossible one, especially with the recent demonetization that has proved that the government is capable of carrying out such rigorous tasks.

What will become of the benami property?

Apart from imprisonment and penalty, the benami property is to be confiscated by the officer in charge of the procedures. 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.

Challenges

Confiscation of benami property will have even bigger challenges than the demonetization scheme and indeed people of middle class might also face some disturbances:

1. It will be difficult to determine which properties are benami and which are actually legal holding by a person who might appear to be not so wealthy.

2. People sell ancestral properties and purchase new ones in a different place using the money they got selling their farms or lands. It should be ensured that the poor are not unnecessarily harassed.

3. People might still purchase properties with black under the name of spouse, children, siblings or relatives and take shelter of personal laws to hide from taxes and prohibitions. It will be a tough job deciding if the money they spend on buying assets was from known source or unknown.

4. Power and sources will still be of help to those who can afford it.

Despite all the challenges, this next surgical strike will be a crackdown on the black money holders, bigger and even worse for those who took to benami purchase right after the demonetization scheme came into effect. People got their servants, drivers and maids to have the assets with a part of benefit to them. This should come not as an anticipated measure but as a surprise just like the midnight demonetization announcement.