When it comes to flow of black money, real estate business accounts for a major chunk of of such illicit funds, accounting regulator ICAI has told the government while seeking urgent steps to check this menace.
In a representation made to Finance Minister Arun Jaitley, the Institute of Chartered Accountants of India (ICAI) has suggested steps to improve business practices in the real estate sector to check flow of black money, an ICAI council member said today.
"Today, black money is largely parked in the real estate sector. The real estate can't be governed only by rules and regulations, but demand and supply mismatch vis-a-vis final consumers has to be addressed.
"Once there is sufficient competition and supply exceeds demand, prices will come down and better practices will be followed by players," ICAI central council member Tarun Ghia told PTI.
He was speaking on the sidelines of the 29th regional conference of the Western India Regional Council of the Institute of Chartered Accountants of India.
He welcomed the government's move in the direction of real estate investment trusts (REIT) and foreign direct investment in the real estate sector.
"Things like REIT and FDI relaxation are in the right direction, though they are merely small steps which have several limitations," he said.
A REIT, or Real Estate Investment Trust, is a company that owns or finances income-producing real estate.
REIT would infuse funds into the market and once it happens, competition would increase, paving the way to keep tabs on black money entering the sector. Today, the real estate market is in the hands of suppliers, Ghia said.
The government must involve the ICAI to frame a policy to curb the black money menace, he said, adding that the ICAI has a big role to play in unearthing black money.
However, this should not end up as some kind of a voluntary disclosure scheme. The entire system of tracking black money would have to be examined so that creation of black money is plugged at the threshold, he said.
"The ICAI council recently made a representation before Union Finance Minister Arun Jaitley. Being a partner in nation building, ICAI is concerned with the menace of black money and would join all efforts made by the government to address the menace," ICAI president K Raghu said.
The ICAI has been batting for a robust taxation and accounting system to curb the menace for quite some time, he said.
"The ICAI has always been working to ensure that black money levels in the economy is brought down through a transparent, robust taxation and accounting system," ICAI Vice President Manoj Fadnis said.
Earlier, it was the ICAI which had recommended deduction of tax through tax deduction at source (TDS), whenever there is a transaction or sale of immovable property, which has already been implemented by the government, he said.
