Black Money Crackdown: Get To Know Benami Property

After demonetization the new buzzword is Black Money. The Government is chasing black money hidden in cash, gold and real estate. The Government is real serious on Benami transactions. You can expect major steps to impose financial curbs on benami transactions in Union Budget 2018-19.

The IT Department is going through the ITRs filed by you and other citizens of India. It is also chasing Corporates to catch unexplained credit and there is a possibility of the Benami Act being invoked.

So what is Benami property and why is the Government chasing it?  Let's find out. Want to know more on residential apartments and tax planning? We at IndianMoney.com will make it easy for you. Just give us a missed call on 022 6181 6111 to explore our unique Free Advisory Service. IndianMoney.com is not a seller of any financial products. We only provide FREE financial advice / education to ensure that you are not mis-guided while buying any kind of financial products.

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Black Money Crackdown: Get To Know Benami Property

In Hindi, Benami means nameless. Lets understand what is a Benami transaction. If a property is held by or transferred by person A and paid for by person B, this is a Benami transaction.

The property is held for the immediate or future benefit of person B. If you have bought a property and it is not in your name, this is Benami property.

If you have made cash deposits which you cannot explain, or you cannot explain sources of investments in your name, this is treated as Benami.

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1. Why Benami transactions?

If you want to evade taxes, you invest black money and buy a benami property (property not held in your name). The real owner is difficult to trace as he/she is hidden behind a fake name/identity.

The person in whose name the property is purchased is called the Benamdar. Benami transactions include buying assets like movable, immovable, tangible or intangible.

• It's easier to hide black money in real estate (benami properties), rather than in cash.
• Cash rich investors who have acquired money through illegal ways, find Benami property an excellent place to hide black money. Tax authorities can easily be circumvented and significant returns can be gained on investments.

SEE ALSO: Modi Government to make Aadhaar compulsory for property?

2. A look at some Benami transactions and investments

• Your brother is a New Zealand based NRI and gifts you Rs 50 Lakhs. You are an Indian resident and you invest this money in shares and equity mutual funds in your name. You intend to give back this money (return the gift money), at a later time. This is a Benami transaction.
• You are a resident Indian, holding a PPF account of Rs 25 Lakhs in the name of your grandson, who is an NRI and a resident of Canada. This is illegal as NRIs are not allowed to open PPF accounts.
• You are an Indian resident and have invested Rs 2 Crore in a bank FD in the name of your married daughter, who is a resident of Singapore. If your daughter denies ownership of the FD, it is a Benami transaction.
• You have purchased property in the name of brother/sister/lineal ascendant or descendant and you are not the joint owner of this property with that person. This property can be declared as Benami.

SEE ALSO: Can blockchain technology stop Benami transactions

3. Why is the Government chasing Benami property?

Benami property is used to hide black money and evade taxes. This affects Government revenue generation and the growth and development of the country. The Government cannot implement development projects and schemes, as money is in short supply if citizens evade taxes.

Benami transactions raise property prices in major cities. The common man who badly needs a house will never be able to get an affordable house in the city.

The tax department is going through property records which are over Rs 30 Lakhs in value. The aim is to check for mismatches in transaction value with your tax profile. If the IT Department suspects a Benami transaction, then get ready for an enquiry under the Prohibition of Benami Property Transactions Act, 1988 (PBPT Act). It is in your interest that you don't get involved in any transaction which you cannot explain or doesn't match your tax profile. Be Wise, Get Rich.