- PM Modi says he has more plans to combat corruption, says will target Benami property transactions.
- The Benami Transactions (Prohibition) Amendment Act 2015 came into force on 1st November 2016.
- New law provides for imprisonment of 1 to 7 years and a fine which can extend to 25% of the fair market value of the Benami property.
NEW DELHI: The government is cracking the whip on black money and ‘Benami’ property transactions are next in line.
“This (demonetisation) is not an end. I have more projects in mind to make India corruption-free. We will take action against benami property,” said PM Modi while addressing a gathering in Goa on Sunday.
'Benami' literally means ‘nameless’ or ‘without a name’. A property transaction is Benami if it includes:
1) Transactions which are made under a fictitious name
2) Property where the owner is unaware or denies knowledge of the ownership
3) And finally, where the person paying for the property is not traceable
Days after the government launched the biggest demonetisation drive in contemporary history; the prime minister says that Benami transactions are next on the government’s agenda for a crackdown.
The Benami Transactions (Prohibition) Amendment Act 2015 was notified earlier this year and it came into force on 1st November 2016. The act aims to strengthen property ownership norms in the country and draws up strict penalties for offender.
What has given additional teeth to the law are the amendments which now provide for establishing an adjudicating authority to investigate all such transactions. Appeals against any order can be taken up to the Appellate Tribunal.
“Government will track Benami transactions and they have made this act more stringent,” says Munish Upadhyay, partner & head of the real estate practice at SNG & partners. “There are penal provisions and the regulator will be appointed as per the new Real Estate Regulatory Act and that regulator is going to have the powers seize the property, sell the property and realise some percentage of that,” he adds.
The new law provides for rigorous imprisonment of one year up to seven years for offenders, and a fine which can extend to 25% of the fair market value of the benami property. It’s not just the direct offenders, the new law can also nab those providing false information with rigorous imprisonment of six months up to five years, and a fine which may extend to 10% of the fair market value of the benami property.
However, the amended law exempts certain cases from the definition of a benami transaction. These include property bought for a member of Hindu Undivided Family (HUF) from the income of that family, property held by a person in a fiduciary capacity and any property bought in the name of spouse or child.
The government has also left room for those who want to come forward and voluntarily disclose all such property holdings. Those who do declare their benami properties under Income Declaration Scheme will get immunity under the Benami Act.
Upadhyay says this will form an absolute clean up in the real estate sector. “In the short term you may see prices correcting by 30-40% but in the longer run it will be a realistic market with realistic pricing,” he adds.
As the government ups the ante in the fight for black money, real estate is one sector that is expected to be affected the most.
Edited By Nikhil Narayan Sivadas