Benami look ahead have a threshold

Benami look ahead have a threshold

The law should take effect from notification.

India’s tax authorities are reportedly inundated with pleas from various trade bodies to soften the two-year-old law to crack down on benami properties. An outright dilution of the law that is targeted against black money is not a good idea. Benami properties — registered in the name of third parties, fictitious or otherwise, by the owner who stays anonymous — should be eliminated, as these are instruments to generate and hide wealth. But the law is being tested and, therefore, it makes sense to remove glitches, to ensure that its enforcement does not lead to undue harassment. One, the government must make enforcement of the law prospective. Two, it also needs to set a threshold limit above which benami properties that have been unearthed would be confiscated. It will also lighten the load on the adjudicating authority, and cut delays in confiscation of benami properties.

The original law — the Benami Transaction (Prohibition) Act — was introduced in 1988, but rules were never framed. The NDA amended the 1988 legislation since enacting a new law would not allow retrospective penalisation. Courts have taken cognisance of this matter. Last year, the Delhi High Court observed that if the amended benami law was being interpreted by the tax department in such a way as to give it retrospective effect from 1988, it would lead to reopening of 20-30-year-old cases, many of which would have gone to the Supreme Court. The department was asked to take a clear stand on how the law would be administered. The ball is in the government’s court.

Reforms are also needed in the real estate sector that is a sink for black money. The sector should be swiftly brought under the goods and services tax that creates audit trails in the income and production chain to curb tax evasion. Title deeds must also be clear to curb fraudulent real estate deals. To give property holders guaranteed ownership, the country should adopt the Torrens system of land registration, in which ownership of land depends not on title deeds but direct entry in a registry maintained and guaranteed by the state. To drive out black money, politics will need to be funded transparently.