Weeding out black money in the form of high-denom currencies is passe. It remains to be seen whether the estimated Rs 4 lakh Crore worth of scrap paper gets jettisoned from the monetary system and if so, what would the Govt really do with this huge surplus. (The value of old notes not returned to the banking system before the set deadline would result in reduction of RBI's liability to the Govt to that extent, resulting in flow of that much funds to the Govt from RBI by way of dividend, reduction in Govt Securities or by whatever name called)
What Next? A hint of PM's speech in Goa on 13th Nov 2016 was a clear pointer to the malaise of Benami properties. This set me thinking of what could be effective and fool proof measures that could be adopted in order to root out this evil once for all.
If I were part of the economic think-tank in the echelons of power, I would have suggested the following measures. These would from crux of the announcements that would be made on 1st January 2017.
1. There will be a holiday period of 90 days commencing from 1st January 2017 upto 31st March 2017 for all property related registrations across all SROs (Sub Registrar Offices) spread across the country covering all states and UTs. In other words, no sale or purchase or POA of properties will be entertained during the aforesaid period of 90 days.
2. All property owners, possessing any single property valued at more than Rs 50 lakhs (Purchase Price or FMV whichever is higher) will have to submit a declaration in triplicate, containing (inter alia) the following information in a Form prescribed for the purpose:
a) Name and address of the Owner of the Property.
b) PAN No. of the Owner
c) Nature of Property (Flat/Commercial Bldg/Residential Bldg/Wetland/Dryland/Farmland)
d) Address of property with Pin Code
e) Date of Purchase/Inheritance/Settlement of property.
f) Name and Last known Address of Seller/Bequether/Settlor.
g) Purchase price and Current Fair Market Value (FMV) of the property in case of purchase
h) FMV (Govt guideline value) of property in case of inheritance/settlement.
i) Income Tax Assessment Circle/Range, in case the owner is an Assessee
Those owning property valued at less than or equal to Rs 50 lakhs (FMV) need not submit this declaration.
The above Form will be required to be submitted in triplicate to the BANK where the owner has his/her SB/Current account. The Bank will retain one copy and acknowledge by endorsing on the other two copies, both of which will be returned to the Owner.
The Owner will have to submit one of the endorsed copy of the Form to the SRO within whose ambit the said property falls under, and obtain yet another acknowledgement from the SRO on the third copy of the declaration, which he needs to keep for his/her records.
3. Such of those properties in respect of which no declaration would have been made before 31st March 2017 (the deadline) will be specifically and temporarily marked by the Govt authorities for mandatory acquisition by the Central Govt.
Note on internal procedures to be adopted by the Govt/Agencies:
1. The Bank will submit a scanned copy of the Form along with digital history of ALL available transactions (in soft copy mode) of the account holder to the Income Tax Department (Specific Circle/Range) for further scrutiny, tax re-assessment if any and final clearance.
2. With the passage of Benami Transaction (Prohibition) (Amendment) Act 2015, which has come into force effective 1st November 2016, the law and punitive measures have been made very stringent and rather "Draconian". (The initial law passed in 1988 lacked teeth). Benamidaar (holder of the benami property) will need to fork out 10% of the FMV as fine with 5 years imprisonment if found guilty of non-disclosure. Of course the property gets confiscated by Govt, in any case. The beneficial owner (the person who has paid for the property) if ascertained from Benamidaar will have to fork out 25% of the FMV as fine AND imprisoned for 7 years and will have to undergo RI - Mandatorily.
3. Considering point 2 above, it is most likely than neither Benamidaar or the beneficial owners would come forward to make the declaration as prescribed above, in which case the property will be confiscated by the Govt.
4. An extended period of another 3 or 6 months would be extended for submitting the Declaration to such of those persons who would have been unable to do so within 31st March 2017 on account of stay in foreign soil/sickness etc. But such declarations will have to be made by the owner DIRECTLY to the income tax authority where he/she is assessed or liable to be assessed along with bank transaction history (obtainable from the bank) and a copy of declaration needs to be submitted to the concerned SRO.
Many Questions could arise about the effectiveness of implementation of the above said measures. Here we need to understand that:
a) 85% of land/property records have been computerized and available in digital mode. This is expected to be completed by mid-December 2016.
b) This would make it easy for the Govt to build and possess a central repository of all property data in classified manner of all propertied assets across the country.
c) Marking of properties as "Genuine" in respect of which Declarations have been received will be easy.
d) By the process of elimination of Genuine properties and such of those valued below threshold limit, the authorities can zero in on all LIKELY benami properties.
e) After the final deadline for concessional declarations (say 30th Sep 2017), the authorities will zero in on all unmarked digital property documents and make a list of all such properties in a classified manner.
f) Govt will finally take over (and develop) all such properties which are suitable/useful and beneficial for social schemes such as PHC/CGHS/Cummunity Halls/Bus Terminus/Rly Stn expansion etc which the Govt would have otherwise done as part of acquisition for Socially relevant schemes (Under Sec 6 of erstwhile Land Acquisition Act). This is where, the surplus from Demonitization could be utilized -is my thinking.
g) Such of those deemed Benami properties which is not required by the Govt will be publicly auctioned. This will fetch a huge revenue to the Govt. This revenue can also be utilized for the purposes stated in (f) above.
h) For such of those who dream of obtaining a stay order from the Courts in India against the above proceedings, I would like to remind them that our Constitution does not guarantee "Right to Property". Even if one has purchased property with hard earned money after paying taxed legitimately, the Govt has the right to take over such property in the interest of general social good, leave alone the right of the State to confiscate Benaami property.
i) Though "Land" is a State subject, Entry No 42 of List III of the Constitution empowers Central Govt in the matter of "Acquisition and Requisitioning of Property" under the Concurrent List.
What Next? A hint of PM's speech in Goa on 13th Nov 2016 was a clear pointer to the malaise of Benami properties. This set me thinking of what could be effective and fool proof measures that could be adopted in order to root out this evil once for all.
If I were part of the economic think-tank in the echelons of power, I would have suggested the following measures. These would from crux of the announcements that would be made on 1st January 2017.
1. There will be a holiday period of 90 days commencing from 1st January 2017 upto 31st March 2017 for all property related registrations across all SROs (Sub Registrar Offices) spread across the country covering all states and UTs. In other words, no sale or purchase or POA of properties will be entertained during the aforesaid period of 90 days.
2. All property owners, possessing any single property valued at more than Rs 50 lakhs (Purchase Price or FMV whichever is higher) will have to submit a declaration in triplicate, containing (inter alia) the following information in a Form prescribed for the purpose:
a) Name and address of the Owner of the Property.
b) PAN No. of the Owner
c) Nature of Property (Flat/Commercial Bldg/Residential Bldg/Wetland/Dryland/Farmland)
d) Address of property with Pin Code
e) Date of Purchase/Inheritance/Settlement of property.
f) Name and Last known Address of Seller/Bequether/Settlor.
g) Purchase price and Current Fair Market Value (FMV) of the property in case of purchase
h) FMV (Govt guideline value) of property in case of inheritance/settlement.
i) Income Tax Assessment Circle/Range, in case the owner is an Assessee
Those owning property valued at less than or equal to Rs 50 lakhs (FMV) need not submit this declaration.
The above Form will be required to be submitted in triplicate to the BANK where the owner has his/her SB/Current account. The Bank will retain one copy and acknowledge by endorsing on the other two copies, both of which will be returned to the Owner.
The Owner will have to submit one of the endorsed copy of the Form to the SRO within whose ambit the said property falls under, and obtain yet another acknowledgement from the SRO on the third copy of the declaration, which he needs to keep for his/her records.
3. Such of those properties in respect of which no declaration would have been made before 31st March 2017 (the deadline) will be specifically and temporarily marked by the Govt authorities for mandatory acquisition by the Central Govt.
Note on internal procedures to be adopted by the Govt/Agencies:
1. The Bank will submit a scanned copy of the Form along with digital history of ALL available transactions (in soft copy mode) of the account holder to the Income Tax Department (Specific Circle/Range) for further scrutiny, tax re-assessment if any and final clearance.
2. With the passage of Benami Transaction (Prohibition) (Amendment) Act 2015, which has come into force effective 1st November 2016, the law and punitive measures have been made very stringent and rather "Draconian". (The initial law passed in 1988 lacked teeth). Benamidaar (holder of the benami property) will need to fork out 10% of the FMV as fine with 5 years imprisonment if found guilty of non-disclosure. Of course the property gets confiscated by Govt, in any case. The beneficial owner (the person who has paid for the property) if ascertained from Benamidaar will have to fork out 25% of the FMV as fine AND imprisoned for 7 years and will have to undergo RI - Mandatorily.
3. Considering point 2 above, it is most likely than neither Benamidaar or the beneficial owners would come forward to make the declaration as prescribed above, in which case the property will be confiscated by the Govt.
4. An extended period of another 3 or 6 months would be extended for submitting the Declaration to such of those persons who would have been unable to do so within 31st March 2017 on account of stay in foreign soil/sickness etc. But such declarations will have to be made by the owner DIRECTLY to the income tax authority where he/she is assessed or liable to be assessed along with bank transaction history (obtainable from the bank) and a copy of declaration needs to be submitted to the concerned SRO.
Many Questions could arise about the effectiveness of implementation of the above said measures. Here we need to understand that:
a) 85% of land/property records have been computerized and available in digital mode. This is expected to be completed by mid-December 2016.
b) This would make it easy for the Govt to build and possess a central repository of all property data in classified manner of all propertied assets across the country.
c) Marking of properties as "Genuine" in respect of which Declarations have been received will be easy.
d) By the process of elimination of Genuine properties and such of those valued below threshold limit, the authorities can zero in on all LIKELY benami properties.
e) After the final deadline for concessional declarations (say 30th Sep 2017), the authorities will zero in on all unmarked digital property documents and make a list of all such properties in a classified manner.
f) Govt will finally take over (and develop) all such properties which are suitable/useful and beneficial for social schemes such as PHC/CGHS/Cummunity Halls/Bus Terminus/Rly Stn expansion etc which the Govt would have otherwise done as part of acquisition for Socially relevant schemes (Under Sec 6 of erstwhile Land Acquisition Act). This is where, the surplus from Demonitization could be utilized -is my thinking.
g) Such of those deemed Benami properties which is not required by the Govt will be publicly auctioned. This will fetch a huge revenue to the Govt. This revenue can also be utilized for the purposes stated in (f) above.
h) For such of those who dream of obtaining a stay order from the Courts in India against the above proceedings, I would like to remind them that our Constitution does not guarantee "Right to Property". Even if one has purchased property with hard earned money after paying taxed legitimately, the Govt has the right to take over such property in the interest of general social good, leave alone the right of the State to confiscate Benaami property.
i) Though "Land" is a State subject, Entry No 42 of List III of the Constitution empowers Central Govt in the matter of "Acquisition and Requisitioning of Property" under the Concurrent List.
