After attacking black money by demonetisation of high value curency notes, Prime Minister Narendra Modi is all set to take on ‘benami’ properties to check corruption. In his last Mann Ki Baat of the year, Modi said the government will soon operationalise a strong law to effectively deal with ‘benami’ properties. “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,” said the prime minister.
The government has already enacted the Benami Transactions (Prohibition) Amendment Act, 2016 which provides for rigorous imprisonment of up to seven years, and a fine which may extend to 25 per cent of the fair market value of the benami property. It also empowers the government to confiscate deposits of people using others accounts to convert unaccounted wealth into white money. But it seems its hasn’t deterred the corrupt from amassing benami properties. Hopefully, the government will make further amendment in the existing law, or may bring a new act, as said by the prime minister.
What is benami property?
Benami in Hindi means without name. So, a property bought by an individual not under his or her name is benami property. It can include property held in the name of spouse or child for which the amount is paid out of known sources of income. A joint property with brother, sister or other relatives for which the amount is paid out of known sources of income also falls under benami property. The transaction involved in the same is called benami transaction. As a usual practice, to evade taxation, people invest their black money in buying benami property. The real owner of these properties are hard to trace due to fake names and identities. The person on whose name the property is purhcased is called benamdar. The benami transactions include buying assets of any kind — movable, immovable, tangible, intangible, any right or interest, or legal documents.
What are the laws against benami properties?
The first act against benami properties ws passed in 1988 as the Prohibition of Benami Property Transactions Act, 1988. To curb black money, the Modi government in July 2016 decided to amend the original act. So after further amendment, Benami Transactions (Prohibition) Amendment Act, 2016 came into force on November 1, 2016. The PBPT Act defines benami transactions, prohibits them and further provides that violation of the PBPT Act is punishable with imprisonment and fine. The PBPT Act prohibits recovery of the property held benami from benamidar by the real owner. Properties held benami are liable for confiscation by the Government without payment of compensation.
Affect of benami transactions on people and need for tough law
Rather than hoarding the black money in cash, the tax evader invest their accumulated illegal money in buying benami properties. The whole process affects the revenue generation of government hampering growth and development of the state. Since the percentage of tax payer in the country is a dismal low, the government fails to successfully implement its policies and schemes due to lack of resources. A tough law against benami properties is the need of the hour to check corruption.