Friday 27 May 2022
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Benami properties: Modi’s next target

New Delhi: It is not a hollow warning Prime Minister Narendra Modi issued through a speech early this week where he hinted he would target benami properties of people next. The Income Tax department had started gathering information about wealth that the filthy rich amassed in anybody’s name other than their own even before the demonetisation move of 8 November.

The process of mining is on and there will be an all-out drive against benami properties across the country from January next year, said one source.

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The benami Transaction Act first came into effect on 19 May 1988, but it was riddled with many loopholes. In 2011, a new bill was passed to plug those deficiencies.

The current NDA government introduced a stricter version of this Act, The benami Transactions (Prohibition) Amendment Act, 2016, which has come into force from 1 November.

Whenever a benami property is confiscated, all rights and titles are transferred to the government. Vigilance officials from various departments are working in close collaboration with offices of district registrars and land records on this matter. People caught with benami properties could end up with up to 7 years of rigorous imprisonment and pay a fine of 25% of the market value of the property, apart from the property getting confiscated.

Also, any false information provided can lead to incarceration for 5 years along with fine up to 10% of the market value for the property.

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During his speech in Goa, Prime Minister Narendra Modi mentioned that those holding benami property will not be spared.

We will take action against ‘benami’ property. This is major step to eradicate corruption and black money — Prime Minister Narendra Modi

In order to ascertain if a property is benami, IT officials will match the valuation of the property with the individual’s declared source of income.

  1. If you have bought some property in the name of your children, but have not declared it in your I-T returns, it is a benami property
    1. Even a joint property, where you are one of the owners who has not declared this asset in his I-T returns, you could be in trouble
  2. An authorised official will be entitled to ask for the documents related to the benami property that he suspects you had bought; you have to come within 90 days
  3. On being found in possession of benami properties, you are liable for prosecution following which you could be served a of rigorous imprisonment of 3 to 7 years and/or fined 25% of the value of the properties
  4. Misleading the authority would attract a penalty of 10% of the property’s value and imprisonment of 6 months to 5 years
  5. You have no reason to worry if any property you have bought in your name or somebody else’s is documented in your I-T returns; such a possession is not considered a benami property

handcuffsSome experts have voiced concern on this issue. Former secretary of the Statistics and Planning Ministry and current head of the International Growth Centre’s India programme, Pronab Sen maintains that this will lead to “tax terrorism”. Other experts have questioned whether the infrastructure exists for such a massive I-T drive.

benami property has been most commonly used in buying agriculture land as well as urban properties bought through shell companies. With the income tax disclosure scheme over by 30th September, experts believe those who have invested in such ventures may find it difficult to escape.

This is likely to further affect the real estate market in India.

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