The Modi government took the monumental decision of demonetization to crack down on black money almost one and a half years ago. Demonetization proved effective in many ways like widening the tax base, exponential increase in digital transaction and instigating fear in the minds of citizens against cash hoarding. According to Economic Survey 2018, 10.1 million people filed income tax returns in the year following demonetization (November 2016- November 2017), while the average for the last six years has been 6.2 million. This shows an increase of over 1.5 times the previous number of income tax returns filed. It should be noted here that in the post-demonetization environment, there has been a sense of fear among tax evaders, which is evident in the increased number of tax filers in the months following the decision.
In the post demonetization period, digital transactions shot up with the number of mobile wallet downloads growing exponentially. The digital transactions can now be traced if they are above the prescribed limit and therefore the government can tax it. Digital transactions are a huge benefit for the economy, and most of the developed countries have a very low share of cash transactions. The Nordic nations of Finland, Sweden and Norway lead the way with more than 90 percent of their transactions carried out through a digital medium. The demonetization decision created a fear of cash hoarding which ultimately culminated not only in more private investment, but also resulted in the growth of gold purchases and benami property transactions.
According to Benami Property Act, a property bought by an individual, not under his/her name (or family’s name) is benami property which includes buying assets of any kind — movable, immovable, tangible, intangible, any right or interest, or legal documents. This property includes properties which are bought in the name of spouse, brother, sister, children for which money is paid from unknown sources of income. In most of the cases, black money is used to buy benami property and the real owner reaps the benefits of this property while the person in whose name the property is purchased holds no power over it and sometimes even unknown to the fact that there exists a property in his/her name.
To crack down on benami property holders, the government has announced a scheme named Benami Transactions Informants Reward Scheme, 2018 which promises to give a personal reward of up to Rs 1 crore for giving specific information about benami properties and transactions in a prescribed manner.
To reap benefits of this scheme, the informant is required to provide specific details about the benami property in a prescribed manner to the Joint or Additional Commissioners attached with the Benami Prohibition Units (BPUs) in Investigation Directorates of Income Tax Department. The information provided by the whistle blower must be actionable under Benami Property Transactions Act, 1988 which was amended as the Benami Transactions (Prohibition) Amendment Act, 2016 to get the benefits of the scheme for which foreigners are also eligible.
The Modi government had hinted at a crackdown on benami properties earlier when they amended the Benami Property bill in 2016. PM Modi in a speech in Himachal Pradesh on November 4, 2017, said “The time has come to return to the poor what had been robbed of them… I am going to create a situation that they (Congress leaders) would not be able to reclaim their benami assets, I am going to create a situation that they would not be able to reclaim it. This is people’s money. This has been robbed of the masses and would be used for their welfare.”
This step by the Modi government shows that it is very serious about tackling black money, benami property or any other illegal means of escaping from tax payment. The government wants more tax because if they have money in their coffers then they can provide better public services like health, education, and infrastructure to the people of the country. India has lowest tax to GDP ratio of 17 percent amongst the BRICS countries of Russia, China, and Brazil, which have above 20 percent ratio. The OECD, which is a group of developed countries, has above 30 percent tax to GDP ratio, and therefore they are able to provide better welfare to the poor people in their nations. In the path towards becoming a developed country from a developing one, the country needs more money in their coffers. This is the reason that Modi government is so tough against illegal practices like benami transactions and is working towards including more people and organisations under the tax umbrella.
