 "LS okays changes to benami property law")
The Lok Sabha on Wednesday passed the Benami Transactions (Prohibition) Amendment Bill, 2015, which provides for confiscation of assets held in the name of another person or in a fictitious name to avoid taxation. During the debate, Finance Minister Arun Jaitley assured that genuine religious trusts would be kept out of the purview.
The Bill also keeps away transfer of property through power of attorney (PoA) from the ambit of benami transactions, giving relief to property buyers in NCR, where transfers through this route have been common. It would also not bring income and assets declared under the Income Declaration Scheme, 2016, to its domain.
The legislation is intended to effectively prohibit benami transactions and consequently prevent circumvention of law through unfair practices. It complements the government’s effort to curb concealment of income.
The Bill was introduced in May last year and referred to Parliament’s standing committee on finance. Amendments to it were approved by the Cabinet last week.
The minister said the legislation was predominately an anti-black money measure.
"A lot of people who have unaccounted money buy benami property in the name of fictitious persons...these transactions have to be discouraged," he said.
On concerns expressed by members about religious properties or those owned by deities or religious institutions, Jaitley said the government would exempt such bonafide entities. If there was a genuinely-held property belonging to a church or a mosque or a gurdwara or a temple, ‘Section 58 says the government has the power to exempt it,’ he said.
He added that exemption to such entities could not be a pretext for tax evasion. "If you make any illegal business out of it...if you create a fake religious sect and start keeping benami property, then the government won't exempt it."
“A large number of property transfers in and around the NCR happens through POA.. A considered decision was taken that while it is not legal, we don’t want to label it benami. It is just an irregular transaction and will be out of the ambit of this legislation,” said a senior official.
The definition of a benami transaction has been widened to include a transaction made in a fictitious name; where the owner is not aware or denies knowledge of the ownership of the property or the person providing the consideration for the property is not traceable.
Those who declare their benami properties under the ongoing Income Declaration Scheme (IDS) will get immunity from this law. The Bill was suitably amended to that effect. IDS is a one-time window till September 30 for black money holders to declare undisclosed assets and come clean by paying 45 per cent tax and getting immunity from prosecution.
Vikram Babbar, executive director at consultancy EY, said: “This would act as an impetus in tracing benami assets and in the case of corporate borrowers siphoning funds and defrauding the banking system. Banks would also be able to take advantage of this as an aid to recovery procedures, once it is established that bank funds have been used to create benami assets.”
The Bill has made the penalty and prosecution provisions more stringent. The penalty under the amended Act will be rigorous imprisonment of at least one year and up to seven years, and a fine which may extend to 25 per cent of the fair market value of the benami property, as against imprisonment up to three years or fine or both in the current legislation.
The penalty for providing false information will be rigorous imprisonment of at least six months and up to five years, and a fine which may extend to 10 per cent of the fair market value of the benami property.
Responding to suggestions of members on why the government had not come out with a new law in place of the 1988 Act, Jaitley said such a move would have given "immunity to persons who acquired benami properties during the period from 1988 to 2016".
The Bill also keeps away transfer of property through power of attorney (PoA) from the ambit of benami transactions, giving relief to property buyers in NCR, where transfers through this route have been common. It would also not bring income and assets declared under the Income Declaration Scheme, 2016, to its domain.
The legislation is intended to effectively prohibit benami transactions and consequently prevent circumvention of law through unfair practices. It complements the government’s effort to curb concealment of income.
The Bill was introduced in May last year and referred to Parliament’s standing committee on finance. Amendments to it were approved by the Cabinet last week.
The minister said the legislation was predominately an anti-black money measure.
"A lot of people who have unaccounted money buy benami property in the name of fictitious persons...these transactions have to be discouraged," he said.
On concerns expressed by members about religious properties or those owned by deities or religious institutions, Jaitley said the government would exempt such bonafide entities. If there was a genuinely-held property belonging to a church or a mosque or a gurdwara or a temple, ‘Section 58 says the government has the power to exempt it,’ he said.
He added that exemption to such entities could not be a pretext for tax evasion. "If you make any illegal business out of it...if you create a fake religious sect and start keeping benami property, then the government won't exempt it."
“A large number of property transfers in and around the NCR happens through POA.. A considered decision was taken that while it is not legal, we don’t want to label it benami. It is just an irregular transaction and will be out of the ambit of this legislation,” said a senior official.
The definition of a benami transaction has been widened to include a transaction made in a fictitious name; where the owner is not aware or denies knowledge of the ownership of the property or the person providing the consideration for the property is not traceable.
Those who declare their benami properties under the ongoing Income Declaration Scheme (IDS) will get immunity from this law. The Bill was suitably amended to that effect. IDS is a one-time window till September 30 for black money holders to declare undisclosed assets and come clean by paying 45 per cent tax and getting immunity from prosecution.
Vikram Babbar, executive director at consultancy EY, said: “This would act as an impetus in tracing benami assets and in the case of corporate borrowers siphoning funds and defrauding the banking system. Banks would also be able to take advantage of this as an aid to recovery procedures, once it is established that bank funds have been used to create benami assets.”
The Bill has made the penalty and prosecution provisions more stringent. The penalty under the amended Act will be rigorous imprisonment of at least one year and up to seven years, and a fine which may extend to 25 per cent of the fair market value of the benami property, as against imprisonment up to three years or fine or both in the current legislation.
The penalty for providing false information will be rigorous imprisonment of at least six months and up to five years, and a fine which may extend to 10 per cent of the fair market value of the benami property.
Responding to suggestions of members on why the government had not come out with a new law in place of the 1988 Act, Jaitley said such a move would have given "immunity to persons who acquired benami properties during the period from 1988 to 2016".
