The country is going into a frenzy with various schemes and changes that Prime Minister Narendra Modi is bringing in, in his fight against corruption. One of the bold steps taken by him last week was the demonetisation of ₹500 and ₹1000 notes in India. Now next is against benami property.
The ‘Benami’ vultures are circling around many. But before it actually hits, let us understand a few things.
When the Prime Minister was on a national tour which included a visit to Goa, He mentioned, “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. My government feels that it is our responsibility to help the poor and I will do it.”
The New Benami Act
This act came into effect on November 1, 2016. Under this law, people are prohibited to carry out illegal benami transactions. What people do, to hide tons of their black money is, buy property under other people’s names. The law states that people caught guilty of doing so can serve up to seven years in prison and/or a monetary penalty.
So let us deep dive and gather some knowledge. What does this term ‘Benami’ mean?
Benami fundamentally means, owning some kind of property without an attached owners name to it. So basically, the person who pays the money for it, buys it in someone else’s name to ensure that he is not caught by the authorities. A move that is carried out by those who horde cash in the form of assets.
What is it that constitutes Benami property?
All property that is not covered in the points mentioned below constitutes benami property:
- Property bought in the name of a spouse or child for which the amount paid is traceable, is SAFE.
- A property that is owned under joint names with blood relatives any other relatives for which the amount is paid amount is traceable, is SAFE.
- Property that is owned by someone in a fiduciary capacity, is SAFE.
However, the property that is bought in the name of your parents can be classified as benami property.
One of the clauses in the act is somewhat borderline given the fact that the Finance Minister Arun Jaitley agreed to the fact that genuine religious trusts would be left out of the scrutiny of Benami property.
The new legislation will make an amendment to the punishment making it seven-year imprisonment and/or a fine, replacing the earlier reprimand of three-year imprisonment and/or a fine.
So, how will this Benami Act affect you?
Any assets movable, immovable, tangible or intangible, could come under the purview of benami if held illegally. The assets include gold as well as financial securities unless they are owned by you and are declared as personal expenses under your name to the required authorities.
This move of declaring them is done in order to ensure that the money that people declare is in proportion to their incomes. If what they own is dis-proportionality large, then the IT department could swoop in and make itself heard. As for the general public, who deal in white money and declare taxes and property regularly, this move will not be an issue.