Income-Tax Department Registers 230 Cases Under Benami Transactions Act
Updated on February 23, 2017:
The Narendra Modi-led government, after the demonetisation drive announced on November 8, had said that after black money they will be going after the Benami transactions in the country. Now, cracking down on these Benami deals, the Income-Tax department has registered nearly 230 cases with assets worth nearly Rs 55 crore. These cases are registered under the new Benami Transactions Act.
Real estate has borne the brunt of many unlawful mishaps over the years. Considering the sector's unorganised constitution yet profitable yield, innovative ways were introduced for multiplying gains. While doing so, we ended up fiddling with the unique characteristics of land; volatility and fluctuations are not the inherent features of land, it is too precious to be so. However, land and its value, as we know it today, is subject to high volatility and great fluctuations. As its very nature, land also could not be subject to any opaqueness – it is right in front of you unlike, say, stocks, and it is as transparent as it gets.
However, years of misuse has led to a change in land and its usage pattern. It has become difficult to differentiate between land and other asset classes. For instance, there are many who believe their investments in the stock market to be safer. No, the concept of property ownership has not lost its charm, it has only gone beyond the comprehension and, if we might add, the reach of a common man. They would rather not have the spell of land and all its charm cast on them. They would not venture into buying any more and that would bring the economy to a standstill.
Several reports of the PropTiger DataLabs show past couple of years have been really painful for the sector with home buyers unwilling to leave the fence. No amount of incentives or discount offers would make them do so. So much so that authorities are now desperate to bring back land's former glory by cleansing it in a phased manner.
Legislations were introduced to do so. The current government introduced two key laws – the Real Estate (Regulation & Development) Act, 2016, and the Benami Transactions (Prohibition) Amendment Bill, 2015 — to clean things up in real estate and allied sectors. To further tighten the noose around those who have been using land to make unlawful gains from real estate, Prime Minister Narendra Modi-led government on November 8 announced existing currency notes of Rs 500 and Rs 1,000 would no more be legal tenders, denominations which were frequently used in transacting high-value assets, with property being the first choice. Things are set to get tougher for those unscrupulous profit-makers in future with the government now planning to go after holders of benami properties hammer and tongs.
Media reports say authorities are chalking up the details of a multi-layer crackdown plan on benami properties that is likely to unfold early next year.
For beginners, benami is a Persian term which means something without a name. However, in the present context, it means proxy. So, a benami property is a property bought by the original owner using a proxy. This helps him park his unaccounted money safely while avoiding paying taxes to the government at the same time. Benami transactions are quite frequent in land purchases, where unaccounted money is used to make the purchase. In the long run, such transactions jack up the overall cost of housing for the common man apart from the obvious impact of bringing a dark-shady tinge to real estate transactions.
“I believe the capital that is chasing land will come down. I don't see an immediate fall in land prices, but transactions will certainly freeze. The overall decline in land prices will have a cascading effect. I shudder to think of developers who have a huge pile of inventory, they will be in deep trouble. Eventually, they will have to reduce prices,” PropTiger Chief Executive Officer Dhruv Agrawala had told The Financial Express after the government's demonetisation annoucement.
The through cleansing of the sector, though painful in the short term, will do much good to land and will reinstate its past glory once more. Sweet are the uses of adversity, indeed!