BENAMI PROPERTY – Understanding the concept and the need to eliminate it

Benami Property in India

Transparency in systems and Eradication of Corruption is a key focus of the present government. As the first leg of this drive, Prime Minister Modi announced the demonetisation process in the country in November 2016. The second phase of this anti-corruption, anti-black money is going to be an attack on ‘benami property.’ Although the law to tackle this has existed for the past many years, not much was done about it.

In its recent strike against the illegalities in the real estate sector, the government announced the Benami Transactions Prohibitions Amendment Act on November 1, 2016. An amendment to the earlier Act of 1988, this new enactment is known as the ‘Prohibition of Benami Transactions Act, 1988 or specifically, the PBPT Act. The following is what you need to understand this entire process and the terms involve therein:

“Benami.”

The word “benami” implies ‘not in the own name,’ taken from the Hindi word ‘benaam’ meaning ‘without any name.’ In the context of property, it just means ‘property that is not bought in your name.’ The property so bought is called ‘benami property’; the person in whose name the property has been purchased is called the ‘benamdar.’ Real ownership of the asset remains in the name of the individual who has paid the money for the deal. Naturally, the only person who stands to benefit in the process is the one who has paid for the property. He is the one who keeps both the papers of the document as well as a power of attorney (POA) to sell the particular property as and when he deems fit. His decision to sell would depend on the property prices.

Components of ‘Benami Property.’

As per the old Act of 1988, all property that does NOT stick to the criteria mentioned below would be called benami property

  • Property that is held in the name of your spouse or child and is paid through known and declared sources of income
  • A joint property with a sibling or any other relative and paid with known and reported sources of income
  • Property that someone holds only in a fiduciary capacity – that is, holding an asset in the name of somebody else but not for his benefit. The holding would have been made so more by trust or guardianship.

Under the old Act, therefore, even property that you would buy in the name of your parents could be termed ‘Benami.’

The New Amendment Act, 2016

The Amendment introduced in November 2016, adopts a more strict approach to the definition of Benami property. It also addresses the aspect of fines and punishment. As per the provisions introduced, the Act has

  1. Revised the definition of Benami transactions and added to the already existing one to also include transactions where:
  • the purchase is made in a fictitious name
  • the owner is either not aware of or denies any knowledge of the ownership of the property
  • the person providing the finance for the property can’t be traced

Property transactions that are conducted between family members would not be called benami transaction. ‘Family members’ here mean only those by lineage – father, mother, grandparents and great grandparents or children, grandchildren and great-grandchildren

  1. Stipulated penalty for indulging in benami transactions
  • The penalty that was about one to three years in the earlier Act would now be up to 7. There would also be a strict fine imposed which could go as high as 25% of the market value of the property.
  • Anybody giving false information would end up with imprisonment for up to five years and would also have to pay a fine of 10 percent of the market value of the property.
  1. Set up legal authorities and Appellate Tribunal to deal with these cases.
  • Four authorities will be responsible for investigations and inquiries namely, the Initiating Officer, Approving Authority, Administrator, and Adjudicating Authority.
  • Names of benami property owners would be dug out by the district registrars and the land record departments.
  • The Initiating Officer will issue a notice to the offender. He can hold the property for about 90 days from the notice date after taking permission from the designated Approving authority; at the end of the period, he could just pass an order to extend the holding of the property.
  • In such a scenario, he would then refer the case to the Adjudicating Authority, who would examine all the documents and evidence regarding the matter. It would be up to him to decide whether the property would still be held as benami or not.
  • There would be an Appellate Tribunal formed that would hear any appeal against the orders of the Adjudicating Authority.
  • If any appeal has to be made against the orders of the Appellate Tribunal, it would be made to the High Court.
  • There will be particular Special Courts also designated to try any offenses related to the new Bill
  1. Redefined the concept of benami property and now included the following –
  • All immovable assets like land, an apartment or house
  • Movable assets like gold, stocks, mutual fund holdings, bank deposits, etc.
  • In case the benami property has been sold it would include the money so earned from the sale too.

This Amendment Act comes as part of a series of moves being made to attain greater professionalism as well as transparency in the Real Estate Sector. It is hoped that ownership title risks would also reduce and benami transactions in the agricultural sector would get reduced. Somewhere in the minds of the government is also the fact that this move would make a lot of lands available for better purposes. The coming months will show how far these attempts of the government will be successful.

The next step Indian government is going to take will be identification of benami properties

All that an NRI needs to know to exchange 500 and 1000 rupee notes

exchange 500 and 1000 rupee notes

They say when you witness change, plunge into it and join the dance – Join the dance by taking care of your own moves first. And just to revise the dance lesson for you, here’s what you need to be careful about-

  • As per the law, NRIs are supposed to reconvert the Indian currency into their foreign currency before they leave India, so they wouldn’t be having much Indian cash with them.
    In case for some reason you were not able to reconvert, the following applies to you….
    You can exchange 500 and 1000 rupee notes till December 30, 2016.
  • If you are not travelling before that, you can still change them until March 31, 2017 by showing identity proof at the RBI offices.This date can be even extended further for person staying outside India after giving the proof of the same.
  • As per RBI guidelines, you could authorise another person in India to deposit the notes in your account – once you have given an authority letter in writing.
  • The authorised person would have to come to the bank branch with the OHD banknotes, the authority letter given by you and a valid identity proof.
  • Valid Identity proof for all such purposes is any of the following: Aadhar Card, Driving License, Voter ID Card, Pass Port, NREGA Card, PAN Card, Identity Card Issued by Government Department, Public Sector Unit to its Staff).
  • Most important, Currency can only be exchanged in India either by personally tendering it or by sending it through an authorized representative.
  • There is no bar on deposit of money as long as you can show source of money/income. Tax is not an issue for an NRI.
  • Remember – you can’t deposit INR cash in the NRE account. This is what can be done-
    a) Make a request for opening of an NRO account with the same customer Identity through the net banking logged in section
    b) Or call the 24×7 customer care
    c) Or placing a request at the particular bank branch in India.
    d) The account opens within 2 working days.
    e) After this, you or your authorized representative may deposit the cash in the NRO account
  • The INR cash cannot be used to create an NRO FD.
    a) For this, deposit the cash in the NRO account and then place a request for NRO FD creation through phone internet banking/ phone banking/ mobile banking/branch.

Modi’s master plan for “A Corruption Free India”

a-corruption-free-india

After a 2 day stint in Japan Prime Minister Narendra Modi returned to a completely changed India in comparison with the one he had left behind. Following his announcement on the war on black money the Indian PM had been hailed a hero, bringing about a much needed change to end corruption in the country. However upon his return he was welcomed with brickbats. Millions of Indians had been left stranded with no legitimate currency to purchase even essential commodities.

At a public meeting in Goa he gave a befitting answer to not just the harassed citizens but his political opponents too over his recent move. A 50 day moratorium was given to expose corruption in the country. A visibly emotional Modi confessed that he had given his entire life for the country and come what may he would continue to serve the people of India and fulfil their demands.

Greeting all those present at the meeting Mr. Modi moved on to the burning topic of currency. He asked the people if they had voted him to power for his vow to fight against corruption. He said if the economists and experts had analysed the financial situation of the country and made amendments periodically this situation would never have arisen. It was a daunting task and he agreed that the fight was going to be long and tough. However he called upon the citizens of the country to support his decision and be patient as the changes took place to allow a new, clean and stronger fiscal India to evolve.

Mr. Modi continued that a SIT had been constituted with the Supreme Court monitoring it. Every 6 months the team would report to the SC on matters of black money and areas of deposit of the same across the world. He said considering the bold steps he had taken in his first cabinet, it was obvious that he had given no signals of leniency about black money and corruption. He had been forthright and honest about all his plans and intended to fulfil the promises he had given to the voters.

There were hurdles in his way mainly over disclosure of names and companies that were hoarding black money abroad. Due to the clauses mentioned in the bilateral tax agreements, nations were apprehensive about giving details of those that had deposited illegal money in their banks. USA however was convinced of the drastic changes Modi wanted to implement in India. Arrangements were finally also made to get details of money going out of the country to other nations. Talks are still being held with several countries to get information on the same.

His next project, which is already underway, is to deal with the issue of benami property, which rightfully belongs to the poor and the country. No undisclosed property in the country will be left unchecked. The corrupt are also known to buy and hoard jewellery without disclosure. Despite stiff opposition from several MPs he passed a rule that anyone buying jewellery worth 2 lakhs or more would require to submit PAN card details. The PAN details would help keep an eye on illegal transactions.

Mr. Modi admitted that the 70 year old epidemic had to be wiped out and since he was running out of time with only 17 months before the polls, it had to be done quickly and smoothly. Earlier jewellers were exempt from paying excise duty and a small number had become very powerful due to their proximity to some ministers. An expert committee was constituted to advice and record any extortion from tax officers. Similar decisions were promised by earlier governments but not implemented or not even thought of but he wanted to bring about a change for the better in the country and govern it honestly.

He continued that several people wanted to be honest and hence were given an opportunity to declare their assets and unaccounted money. Businessmen deposited money to the tune of Rs 67,000 crore and have paid the penalty. The government, in the past 2 years has collected 1.25 lac crore through various raids, surveys and declarations. Another scheme that had been introduced earlier was the Jan Dhan scheme which had been mocked by most, the relevance of which would now be known. Small steps have been taken to ensure a cleaner India, similar to giving small doses of medicine to cure an epidemic. Mr. Modi also hinted at more projects in the pipeline to curb corruption and dishonesty in the country.

Ten months ago an operation began of printing new currency notes to be distributed to banks but the information had to be kept under wraps or the corrupt would have found ways and means to cover their tracks. He appealed to the people of India to cooperate and make this into a success. He agreed that countrymen would face problems following this decision but it was only a matter of 50 days and the hardships would be over. He said he had faith in the power of honesty and firmly believed that it was not him but the 1.25 lac citizens of this country that would lead it forward and make this operation a resounding success.