People planning to park their unaccounted wealth in real estate in the names of their drivers, maids or through shell companies, probably using demonetised notes of Rs 500 and Rs 1000 are in trouble , especially after prime minister Narendra Modi’s warning that more anti- graft steps are on the anvil and after the stringent Prohibition of Benami Property Transactions Act (PBPT Act) came into effect this month.
Under the Act, a transaction is named ‘benami’ if property is held by one person, but has been provided or paid for by another person. It also prohibits recovery of the property held benami from benamidar by the real owner. Benami properties are liable for confiscation by the government.
People caught with benami properties could end up with up to seven years of rigorous imprisonment and pay a significant fine. Additionally, the properties will be confiscated. A person could also face rigorous imprisonment for up to five years for knowingly giving false information and will have to pay a fine of up to 10% of the market value of the property.
Punishment has been increased to seven years for those who have invested in benami properties and five years for those who knowingly give false information to others into such transactions. The former will have to pay a penalty of 25% of the fair market value of the benami property and those who give wrong information are liable to pay 10% of the fair value of the property,
What this means is that a property worth Rs 1 crore will attract a penalty of Rs 25 lakh and seven years of imprisonment. The outcome is not only loss of asset but also penalty and punishment. So, someone who bought property in the name of his peon, driver or anybody unrelated to him and invested in agriculture property in their name, there is no escape.
What was the modus operandi? The benamidars would keep the original documents in person and execute a power of attorney that allows them to sell whenever the price appreciates. This mode of buying property was most common in case of agriculture land and urban properties bought under the name of shell companies.
Usually cash was used to buy such properties but now with a ban on Rs 500 and Rs 1000 notes, most commonly used denomination for investing in real estate, the government is perhaps warning people that they should not use their black money in investing in properties that are not in their name, says a real estate expert.
|Income Disclosure Scheme|
With the Income Disclosure Scheme ending on September 30 this year, it may be difficult for people who bought such properties to exit without serious consequences,