1. Black money crackdown: As Income-Tax Dept targets Benami property assets and deals, here are 7 points to beware of

Black money crackdown: As Income-Tax Dept targets Benami property assets and deals, here are 7 points to beware of

The Income Tax Department is now scanning the income tax filings of individuals and corporates to ascertain unexplained credits and might even invoke the Benami Act wherever required.

By: | Updated: December 16, 2017 6:05 PM
benami act, benami transactions, benami property, benami property act, I-T Dept targets benami deals deposits, transactions which can get one into trouble under Benami Act, Unexplained cash deposits, It is in your own interest not to get involved with any deposit, investment or transaction which can not be explained or which doesn’t match with your tax profile.

If you have unexplained cash deposits or are unable to explain the source of investments made in your name, then be prepared for your deposits and investments to be treated as benami. In fact, according to sources, the Income Tax Department is now scanning the tax filings of individuals and corporates to ascertain unexplained credits and might even invoke the Benami Act wherever required. Not only this, many other types of transactions and investments are also under the income tax lens now.

For instance, the tax department is scanning the records of the property exceeding Rs 30 lakh in value and in cases where the transaction value is not matching with the tax profile of the individual, the department may initiate the inquiry under the Prohibition of Benami Property Transactions Act, 1988 (PBPT Act). However, there are chances that the property may become benami for a few technical reasons also, like when you are not a joint owner of the property you have purchased for your brother or sister.

Keeping this as well as other developments in view, it is in your own interest not to get involved with any deposit, investment or transaction which can not be explained or which doesn’t match with your tax profile.

What is a Benami Transaction?

A benami transaction is a transaction where the legal owner and payer of a property transaction are two different persons. As per the revised provisions, a Benami transaction is:

1. A transaction where a property is transferred to or held by one person for direct or indirect, immediate or future benefit of another person, who has provided or paid the consideration, except when

i.) An HUF is purchasing a property in the name of a Karta, or any other member from known sources;

ii.) A person is holding the property in a fiduciary capacity (e.g. trustee, executor, partner of a partnership firm, director of a company, a depository participant, etc.);

iii.) An individual is purchasing a property in the name of his spouse or any child, provided the consideration is paid out of the known sources;

iv.) Any person is purchasing a property in the name of his brother or sister or lineal ascendant or descendant, where he is one of the joint-owners, provided the consideration is paid out of the known sources;

or

2. A transaction carried out in a fictitious name; or

3. A transaction where the owner of the property is not aware of or denies knowledge of such ownership;

4. A transaction where the person providing the consideration is not traceable or is fictitious.

Thus, “any transaction where possession of any immovable property is taken as a part performance of a contract is not a Benami transaction if the contract is registered and consideration as well as stamp duty have been paid,” says Akhil Chandna, Director, Grant Thornton India LLP.

It should also be noted that property would include asset of any kind, whether movable or immovable, tangible or intangible, and includes rights or interest as well as proceeds from the property. Keeping the above in view, here we are taking a look at some types of investments and transactions which are benami and can get you into trouble under the Benami Act:

1) A non-resident Indian and a resident of Australia gifts Rs 1 crore from his NRO account to his resident brother, who further invests in mutual funds, equity shares of listed company etc. in his own name as a single owner in India, with an intention to return the gift amount to his brother in future. This is a benami transaction.

2) An Indian resident, holding a PPF account of Rs 20 lakh in the name of his granddaughter, who is a non-resident Indian and a resident of the US, as a single owner is a Benami transaction. Also, it is not legal as NRIs are not allowed to open a PPF account.

3) Mr. A, an NRI from the UK, purchased a property for Rs 4 crore in India. The payment of Rs 1.6 crore was made unofficially in cash and Rs 2.4 crore was made officially by cheques. However, only Rs 1 crore was paid from his bank account and balance Rs 1.4 crore was paid in cash to the builder who arranged cheques of unknown persons. “The documentation includes cheques’ information (cheque number, date, amount) of total Rs 2.4 crore paid for the property. For the registration, stamp duty payment, as well as in all correspondence and documentation, Rs 2.4 crore was used as official consideration of property, which was purchased in his name. This is a benami transaction as Rs 1.4 crore was paid from Mr. A’s un-known sources/ bank account,” explains Chandna.

4) An Indian resident invested Rs 10 crore in a bank FD in the name of his married daughter, who is a Singapore resident. If she has no knowledge and denies ownership of the FD, then it is a benami transaction.

5) Being unable to explain the source of investment

The Income Tax Department has recently said that it is scanning the tax profiles of all property registrations above Rs 30 lakh. “The inquiry is being done under the provisions of the Anti-Benami Act and if these profiles are found suspicious or incorrect, action will be taken. What this means is that if you are not able to explain the source of investment made in your name, then you carry the risk of your property being traded as benami,” says Chetan Chandak, Head of Tax research, H&R Block India.

6) Not buying property in your own name

Also, when you have purchased the property in the name of your brother or sister or lineal ascendant or descendant or any other person, but you are not joint owner of such property with that person, then also the property may be declared as benami. To avoid this, technically you should be joint owner in the property document or a gift deed should be executed in favour of the person in whose name the property is registered.

7) Unexplained cash deposits

If you have unexplained cash deposits or credits in your account, and you are unable to explain their source to the Income Tax Department, then also you carry the risk of those deposits or credits being declared as benami.

It may be noted that these are only some types of benami deals and transactions and many more types of transactions can come under the Benami Act now.

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  1. N
    nandan
    Dec 12, 2017 at 5:20 pm
    Why scan the transaction of poor people. Just get hold of a few politicians and bureaucrats and you will get hordes of dealings.
    Reply
    1. R
      Reader
      Dec 11, 2017 at 9:39 pm
      The biometrics-based Aadhaar program is inherently flawed. Biometrics can be easily lifted by external means, there is no need to hack the system. High-resolution cameras can capture your fingerprints and iris information from a distance. Every eye hospital will have iris images of its patients. So another person can CLONE your fingerprints and iris images without your knowledge, and the same can be used for authentication. That is why advanced countries like the US, UK, etc. did not implement such a self-destructive biometrics-based system. If the biometric details of a person are COMPROMISED ONCE, then even a new Aadhaar card will not help that person. This is NOT like blocking an ATM card and taking a new one.
      Reply
      1. J
        JN
        Dec 12, 2017 at 1:35 pm
        lol... talk of scared tax evader
        Reply
      2. R
        Reader
        Dec 11, 2017 at 9:39 pm
        UK’s Biometric ID Database was dismantled. Why the United Kingdom's biometrics-linked National Identi-ty Card project to create a centralized register of sensitive information about residents similar to Aadhaar was scrapped in 2010?? The reasons were the massive threat posed to the privacy of people, the possibility of a surveillance state, the dangers of maintaining such a huge centralized repository of personal information and the purposes it could be used for, the dangers of such a centralized database being hacked, and the unreliability of such large-scale biometric verification processes. The Aadhaar program was designed in 2009 by mainly considering the 'Identi-ty Cards Act 2006' of UK, but the UK stopped that project in 2010, whereas India continued with the biometrics-based program. We must think why the United Kingdom abandoned their project and destroyed the data collected. (Google: 'Identi-ty Cards Act 2006' and 'Identi-ty Documents Act 2010' )
        Reply
        1. R
          Reader
          Dec 11, 2017 at 9:39 pm
          The US Social Security Number (SSN) card has NO BIOMETRIC DETAILS, no photograph, no physical description and no birth date. All it does is confirm that a particular number has been issued to a particular name. Instead, a driving license or state ID card is used as an identification for adults. The US government DOES NOT collect the biometric details of its own citizens for the purpose of issuing Social Security Number. The US collects the fingerprints of only those citizens who are involved in any criminal activity (it has nothing to do with SSN), and the citizens of other countries who come to the US.
          Reply
          1. R
            Roopchand Bajaj
            Dec 11, 2017 at 8:05 pm
            But what is for Borker /sub broker shares bought by individuals payment also made by him and never transfer delivery to the party account keeping with them and later on say after 2-3 years denied for and say you sold it either or adjusted against your debit and never settled account and cheated in millions and in some cases crores after a period on account of horrible price rise after Oct - Nov 2008 Feb - March 2009 fall also. Why IT dept, not asking exempting dividend income (source of funding date of purchases/ since holding telly it from bank passbook) ask them to submitted copy (purchases bill and payment proof).
            Reply
            1. V
              vasu
              Dec 11, 2017 at 3:41 pm
              Unless all property registration is made online with mandatory aadhaar card no, property benami deals are quite difficult to detect.
              Reply
              1. Satender Kumar Arora
                Dec 11, 2017 at 12:49 pm
                It is a good move. Surely, Investigating agencies will find not only properties and/or other assets but even the companies and trusts etc. have been formed/promoted in the names of employees viz drivers, peons, gardeners etc. and blank cheque book and blank authority letters and affidavits have been got signed from them. Let us hope that Investigating agencies go deep into all such tactics and bring the culprits to book.
                Reply
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