It is a matter of common knowledge that black money hoarders try to convert their ill-gotten funds into gold and real estate by way of Benami Property transactions. While the government has already taken steps to track those who tried to buy gold with the old currency notes, the real estate market dealings are also being closely tracked. As a result both gold and real estate market have nose-dived since the demonetisation move.
In an interview to Times of India, recently, the commerce and industry minister NirmalaSitaraman clearly stated that the fight against black money will not end with demonetization. The minister said, “One of the steps is that the Benami Act, which has been passed in parliament, has to be used and invoked wherever necessary.”
So, it is not difficult to decipher the next set of actions that the government is going to take to trap those who are looking to route their funds to real estate market through Benami transactions.
How could benami Property transactions exist for so many years?
Benami Property transactions have been declared illegal by an act of 1988, but it could never into force as the Central Board of Direct Taxes which had to implement it could never frame the laws. This allowed the Benami Property transaction’s to continue.
What Modi government did?
To curb these, Modi government passed, The Benami Transaction (Prohibition) (Amendment) Bill, 2015 early this year elaborating the breach of benami transactions. Prime Narendra Modi warned the Benamidars with more stringent actions after Prohibition of Benami Property Transactions Act (PBPT Act) came into effect this November.
This act describes ‘benami’ transaction happens when the property is owned by a different person than the one who had paid or provided for it. It forbids the real owner from recovering the property from the benamidar. The act allows the government to confiscate the benami properties.
- People who invested their funds in benami properties will be punished with seven years of rigorous imprisonment. Not to mention the entire benami property will be confiscated. They will also have to pay 25% of the fair market value of the benami property.
The government has ensured those who facilitate such transactions are also not able to go scot free. Accomplices in such transactions can be jailed for five years, if they forward wrong information knowingly. Such persons are liable to pay 10% of the fair value of the property.
The effect of drive against Benami Property
So, anybody who purchased property in the name of their driver, house maid, peon or anyone else unrelated to them, or bought agricultural property in the name of a false owner, will be well and truly screwed. For example, an owner of benami property worth 1 crore is liable to be penalized with INR 25lakh and 7 years in jail.
Those who already hold such property won’t be able to convert them into any other form. They would prefer to lose properties because it is impossible to evade the punishment and penalty.
S K Pal, Supreme Court lawyer told Hindustan Times, “Many would much rather relinquish his interest or rights over the property because the cons are so high. A power of attorney is a legal piece of document but now the driver and peon in whose name the property may have been bought will have to declare their source of income from which such properties were bought and their inability to do so may lead to more people relinquishing their interest in such properties going forward.”