A major part of black money in India is held in the form of benami properties (gold and cash are other forms). In a bid to fight against the black money held in form of cash, the Government of India announced Demonetisation on November 8, 2016. Now certain stringent measures to curb the black money are expected on benami properties as well.
Would this ‘tough action’ be in the form of another legislation, since Indian Government is known for passing numerous legislations, but fail miserably in implementing most of them? The best example, is the Benami Transactions (Prohibition) Act, passed in 1988 was gathering dust without any action.
Though the present government added more teeth to it by amending it recently (Benami Transactions (Prohibition) Amended Act, 2016), activities to catch benami properties are still going on slowly. For example, this amended Act came into existence from November 1, 2016. However, action taken is restricted to a few immovable properties and bank deposits after demonetisation (bank deposits are also treated as property under this Act).
Finding the real beneficiary of benami properties is a Herculean task and that is the main reason for its slow implementation.
What are the measures to speed up this information gathering? For this the government should come out with cash reward up to Rs 1 crore for ‘secret informers’ (those who give tips to tax agencies). But the success rate will be less because people will be scared that some rogue employees from these agencies will leak the information of the informer. For example, similar rules in income tax and customs rules are not fetching big information. Since most people already have an Aadhar number, asking them to link it to their property documents is a better option.
The main advantage of this strategy is that the tax authorities will get details about ‘legal owners’ (owner as per property documents) immediately. Several historical property deals might have happened in fictitious names and they will get stuck immediately.
Several black money hoarders also used to register properties in other’s name (e.g. in the name of servants, some family members who are poor, etc) after getting their signatures (these poor people have no idea what these signatures are meant for).
In these cases, the original property documents are kept by the ‘original owners’ and in most cases, they also keep a power of attorney signed by ‘legal owners’.
Once the Aadhaar linkage happens, tax authorities can approach the ‘legal owners’ and it can be treated as benami property if the ‘legal owners are unaware or denies knowledge of the ownership’.
Even if the ‘legal owner’ takes onus and claims that it is his property, he needs to show the ‘source of income’ for buying that property (e.g. will be difficult for a house maid to show source for property worth crores).
Will this amount to harassing the ‘genuine tax payers’ as the Aadhaar opponents will put it?
No, because there are several provisions in the Benami Transactions (Prohibition) Amended Act, 2016 to protect them. For example, the usual transactions like buying property in the name of spouse, kids, parents, joint names with siblings, etc is already exempt in the Act. However, they need to show the source of money used for such purchase.
Will this amount to some discomfort to ‘genuine tax payers’? Yes, because they may have to visit the registrar’s office for updating their Aadhaar number.
However, most of them will support this move because it will result in unearthing huge black money. Only thing, since this process will be time consuming (some people may be working in cities, but may have properties in villages), government should give enough time to property owners for doing this.