The government is getting ready with its Brahmastra. It will soon introduce anew version of a 27-year-old law to unearth benami property, or property held in the name of someone other than the actual owner.
A brainchild of former Congress law minister P Shiv Shankar, the Benami Transaction (Prohibition) Act, was passed by Parliament in 1988. The story pretty much turned out like the boy who cried wolf. The law was never enforced although successive governments vowed to write rules to punish abenami property-holder. The file even went missing mysteriously once but resurfaced only to gather dust in North Block.
Version 2.0 will be much more stringent. That’s what Jayant Sinha, minister of state for finance, told Lok Sabha. He said the law will enable confiscation of benami property and provide for prosecution, blocking a major avenue for generation and holding of black money in the form of benami property, especially in real estate.
Agreed, benami transactions, speculative in nature, push up demand in the property market and fuel prices. But to expect the new avatar of an old law to be a serious threat to the black economy is plain naive. The cure for the disease lies elsewhere: land market reforms, issuing an Aadhaar to every Indian citizen, tax reform that includes bringing property deals under the goods and services tax (GST) and making poll-funding transparent.
To end speculation in property, the government needs to do away with the artificial shortage of land, which is policy-induced, and free more land for urban development. It’s baffling why, say, government departments like Indian Railways and defence sit on huge unused tracts of land. Also, there is no reason why many states persist with an outdated classification of whether land is for farming or for setting up factories. Absurd rules on usage should go.
All states should modernise land records to enhance transparency in ownership. Already, some state governments capture electronic records of land ownership, which is akin to dematerialising shares. Conclusive titling must also be ensured as presumptive titles lead to frauds and under-reporting of the value of land deals. India should follow Britain and Australia and take on the Torrens system of direct registration of title in a central registry. For that, all the parcels of land will have to be entered in a register with the owner specified. The state has to guarantee ownership and become the keeper of land and title records. Benami deals will drop dramatically when the title becomes a certificate of valid ownership.
The UPA’s draft model Bill on land titling sought to provide conclusive titles. It also required every state to establish a Land Titling Authority to write rules, create and update the register of titles, assign a unique identity number to each piece of land and provide valuation details, if need be. Narendra Modi government should revive the Bill. As land is a state subject, all states should come on board to implement the reform to improve governance. Land market reforms must top India’s agenda.
The government should also issue a unique identification number to all citizens, like the social security number in the US. Aadhaar fits the bill perfectly, and can be linked to property deeds, not just bank accounts. The Supreme Court, which is against making Aadhaar mandatory, should see reason. The tax information network and a foolproof permanent account number (PAN) also enables tracking of fund flows to and from any bank account and establish audit trails. Benami deals will be difficult when every citizen has an Aadhaar. This will obviate the need for a mandatory PAN.
Bringing the real estate sector into GST is also a good idea. The suggestion, made by a task force of the Thirteenth Finance Commission, would mean subsuming stamp duties levied by states into GST. Credit for the taxes paid on inputs would be available once this is done, creating audit trails. This will cut out benami deals.
We need action on all these fronts to stem the generation of black money, rather than introduce the so-called black money Bill and another law to punish benami property-holders in the country. Whether a property is benami or not is a question of fact. The onus of proving whether the property is benami will rest with the government. All this would mean lot more work for the enforcement agency (read: tax administration) that is already under flak for its arbitrariness.
Nothing, apart from political posturing, explains the tearing hurry to adopt new laws whose enforcement pose huge challenges. It could also incur the wrath of farmers, up in arms against the land Bill. We don’t need a throwback to inspector raj days.
DISCLAIMER : Views expressed above are the author's own.
