Fighting black money within and outside India

The recently enacted Benami Transactions (Prohibition) Amendment Bill, 2015 empowers the income tax department to confiscate ill-gotten wealth and punish the guilty.

To fight black money and curb money laundering, the Union government has two new arms. While the earlier law deals with stashed wealth abroad for tax evasion, the latest one deals with benami assets within the country.

Many wealthy Indians have undisclosed bank deposits abroad. Stringent provisions in the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 can bring such people to justice.

Under the income declaration scheme announced by the government, benami property holders can come clean after paying a tax of 45 per cent. They have time till September 30 to disclose their ill-gotten wealth.

Here is why benami transactors have to fear the new law:

Taxman knows
Income tax officials are aware of all the major financial deals within the country. This is because it is now mandatory to use of Permanent Account Number (PAN) and Unique Identification Number (Aadhaar) while purchasing land, vehicles, bank dealings and stocks.

Friendly nations have started sharing bank account details of Indian citizens. Foreign banks are far more cooperative in investigations. As digital transactions become more common, tax evaders will find it tougher to conceal their secret dealings. Moreover, the government is planning to set limit for cash handling. So anybody dealing with valuable assets can come under the long arm of the taxman.

Benami property
Benami property refers to all kinds of movable, immovable, tangible and intangible assets held in the name of another person to conceal the identify of the real owner. Valuables like financial securities, gold or interest could come under this. Jointly owned properties should have evidence of the financial source and the burden of proof is on the taxpayer.

Exemptions
Properties transferred via power of attorney do not come under the purview of the benami law. The law has exempted properties owned by deities or religious or charitable institutions with a genuine background.

Stringent punishment
The benami assets will be confiscated and a fine of up to 25 per cent of the market value of the asset will be collected. The beneficial owner—benamidar—or a person abetting is liable for rigorous imprisonment up to seven years.

Acquisition
Four authorities—the initiating officer, approving authority, administrator and adjudicating authority—will be in charge of the process, right from issuance of notice to conducting investigations and finally, confiscation, if necessary.

Malicious intent
In order to protect innocent citizens from malicious attacks, the law has provision to punish persons who provide false information. Such persons can be fined up to 10% of the market value of the benami property and sentenced to rigorous imprisonment for six months to five years.

Speedy trial
An appellate tribunal will hear appeals against the orders of the adjudicating authority. All punishable offenses under the law will be tried at sessions courts, to be designated as special courts. Aggrieved party can move the High Court.

Role of CBDT
No prosecution will be initiated against anybody without the approval of Central Board of Direct Taxes (CBDT).

Advantages
During the discussions in Parliament, the finance minister emphasised the deterrent power of the law. Tracing and confiscation of benami assets will curb money laundering. It acts as a guard against corruption in public life. Corporate borrowers have siphoned off bank loans and converted them to benami assets. Banks can take advantage of the law to speed up the recovery procedure.