New Delhi: Parliament on Tuesday passed the Benami Transactions (Prohibition) Amendment Bill, 2015, paving the way for a comprehensive legislation to tackle black money within the country.
The bill, passed by the Rajya Sabha (RS) on Tuesday, provides for confiscation of benami properties—assets held in the name of another person or under a fictitious name to avoid taxation and conceal ill-gotten wealth.
The bill was passed by the Lok Sabha last week and will become an Act once the President gives his assent. Once enacted, it will plug a gap in the National Democratic Alliance government’s efforts to tackle black money.
The government has already enacted the stringent Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015, to penalize those with unaccounted wealth abroad.
“There is black money both within and outside the country—it is a reality. If we have to stop black money generation, formulating laws and their implementation has to be a continuous process," finance minister Arun Jaitley said while replying to a debate on the bill.
“The transactions before 1988 will not be covered (under the amended law). Prior to 1988, the Indian Trust Act had certain provisions that permitted benami transactions," he said.
The Benami Transactions (Prohibition) Amendment Bill provides for a fine of up to 25% of the fair value of the asset and jail time of up to seven years; an earlier version stipulated one of the two.
The term “property" will cover movable, immovable, tangible and intangible properties. In case of joint ownership of property, the taxpayer will have to show financing sources.
The bill was tabled in May last year but was later referred to the standing committee on finance.
The panel submitted its report in the budget session this year and recommended a slew of changes, including giving more time to property holders to furnish information, a time-bound process for initiating investigation and filing appeals, and for allowing some exceptions for properties considered benami.
The government has accepted some of these recommendations.
Jaitley also detailed the various steps taken by the government over the last two years to curb black money, including making the Permanent Account Number mandatory for transactions above a particular threshold, acting on information received from countries such as France and Switzerland, and the income disclosure scheme to give domestic tax evaders a one-time opportunity to declare unaccounted wealth and get away with paying a 45% tax.
Countering concerns about the arrest provisions that are part of the benami transactions bill, Jaitley said that this was mainly in the form of a deterrent. “I hope people get clear signals and do not give the state a chance to use the law," he said.
B.M. Singh, a former chairman of the Central Board of Direct Taxes, added a note of caution, pointing out that all benami property transactions are not necessarily related to black money.
“All benami property transactions may not be illegal. Some of them may be due to some restrictions on property purchases in some states. So not all benami property purchases may from unaccounted wealth," he said.