Benami Property Black Money Crackdown: On asset above Rs 30 lakh, here’s how you can avoid trouble from I-T dept

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Updated: November 18, 2017 11:00:26 AM

The government is now gunning for Benami property in all earnest, and this even includes homes in the lower-budget categories.

benami property, benami Act, Property registrations above Rs 30 lakh, Property above Rs 30 lakh under tax lens, PBPT Act, income tax department, CBDT,If you are not able to explain the source of investment made in your name, then you carry the risk of your property being treated as benami.

If you thought that only the benami property or those acquired through illegal means were under the Income Tax lens, then think again. For, the government is now gunning for benami property in all earnest, and this even includes homes in the lower budget categories. The Income Tax Department has already started 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, CBDT chief Sushil Chandra has said.

“This means that if someone is not able to explain the source of investment made in one’s name, then one carries the risk of one’s property being traded as benami. The Income Tax Department is already 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 PBPT Act,” says Chetan Chandak, Head of Tax Research, H&R Block India.

Thus, it is not a ‘benami’ property which may become benami, but considering the above law provisions, there are chances that a piece of property may become benami for a few technical reasons also. Keeping this in view, here’s what you need to do so that your property is not declared benami:

1. If the property is not duly registered, then that may be a major red flag for the tax authorities.

In previous years, many property buyers had registered the homes they had bought under names other than those of the actual owner, to evade taxation. “The government is now gunning for Benami properties in all earnest, and this even includes homes in the lower budget categories. Lack of registration of a property in the right person’s name will be a major red flag for the involved authorities,” says Anuj Puri, Chairman, ANAROCK Property Consultants.

Therefore, if a homeowner has not got the property duly registered so far, this must now be done with greatest expedience. “If there are legal impediments to doing this, they must consult an advocate experienced in property matters and, if possible, get these impediments cleared and the property duly registered,” suggests Puri.

2. If you have purchased the property in the name of your brother or sister or lineal ascendant or descendant, but you are not the joint owner of such property with that person.

In this case technically you should be the joint owner in the property document, else it can be termed as benami. “To avoid this, you can add your name to the property document or in case if you do not wish to add your name in the property document, then you can execute the gift deed in the favour of the person in whose name the property is registered. Anyways the gift between the covered relatives are not taxable and post the execution of the gift deed, the other person technically does not hold the property for your benefit, which will take the property out of the scope of benami transaction,” says Chandak.

3. Many NRIs who are living outside India for a long period and are not having any source of income in India, are not required to file their tax returns in India. In their cases if the Tax Department tries to match the property value with their tax records, it will result in obvious mismatch and may trigger inquiry under the PBPT Act.

In this case it is very important for these NRIs to prove that this investment was made out of their overseas tax-paid savings. In this case they should preserve the records of their overseas earning, tax returns filed in other country, their passport records proving their NR status for the respective years, etc. This will help them in explaining the source of the investment.

4. There may be a case where the owner of the property enters into an agreement for the transfer of property and transfers the possession of the property under part performance referred to in section 53A of the Transfer of Property Act, 1882. In this case technically the person receiving the possession becomes the owner of the property, but the legal title of the property still remains in the name of the transferor.

“In this case to save the property from being treated as benami, it is important to ensure that the (i) consideration for such property has been paid by the person to whom possession of property has been allowed. (ii) stamp duty on such transaction has been paid; and (iii) the contract has been registered,” informs Chandak.

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