Moving swiftly, the government got Cabinet clearance on Wednesday for a law to tighten the noose on those hiding undisclosed income through benami property but also introduced the Bill in the Lok Sabha, on the last day of the Budget session.
It also agreed to refer it to Parliament's standing committee on finance.
Benami is a term from north India to refer to the purchase of a property in the name of somene other than the person or entity having actually financed the transaction.
Parliament has already passed the Undisclosed Foreign Income and Assets (Imposition of Tax) Bill, 2015, which seeks to nab those having unaccounted money abroad. This Benami Transactions (Prohibition) Amendment Bill, 2015, is aimed at curbing the circulation of undisclosed income in the country which is hidden through benami properties. It seeks to amend the existing Benami Transactions (Prohibition) Act, 1988, and provides for confiscation of the property, rigorous imprisonment up to seven years and a fine of 25 per cent of the fair market value of the property.
Financial securities or gold could also come under the scanner in this regard. Such transactions will however exclude property in the name of a spouse or child, in case the amount for such a property was paid out of the known sources of income of the individual concerned. Similarly, a joint property in the name of brothers, sisters or other kin where the amount is paid from known sources of income would also not come under benami property.
So, property held even in the name of those mentioned above would become benami if the sum has been paid from unknown sources of income.
The fair market value of a property would be determined from the price it would ordinary fetch on sale in the open market. In cases where the price is not ascertainable, another procedure would be prescribed.
An assistant or deputy income tax commissioner, designated as Initiator by the government, would be authorised to start proceedings into an allegedly benami transaction. The officer would refer the case to an adjudicating authority, to be set up. The authority will decide within a year if the property is benami. The Bill also provides for an appellate tribunal.
After the order becomes final, the property or properties in question would be confiscated. These are to be managed and disposed off by designated officers.
K V Karthik, senior director, Deloitte India, said: "Often, assets obtained as proceeds of crime are held in the name of a benamidar. The proposed Bill will make such transactions illegal and to that extent, will be a useful tool in the fight against black money.”
Finance Minister Arun Jaitley had proposed the new Bill to replace the 1988 Act in his Budget speech though what has come is formally an amendment to the existing law.
In 2011, the earlier government had introduced in Parliament a Benami Transactions (Prohibition) Bill, which proposed replacing the 1988 Act. It was referred to the standing committee on finance, which gave a report in June 2012. The Bill lapsed when the 15th Lok Sabha was dissolved.