Whether it is your bank account, life insurance policy, mutual fund investment, demat account, or mobile connection, linking them with one’s Aadhaar number, is becoming all pervasive. The government, in a bid to deal with the menace of corruption and black money, has hinted that it may consider linking immovable properties with Aadhaar numbers, as well. If such a move is implemented, it will have widespread ramifications and make the implementation of the benami transaction law easier. The Benami Transaction Act was notified in November 2016, at almost the same time as the announcement of the demonetisation drive. This law is administered by the Income Tax Department. After the benami law came into force, the I-T Department has attached around 475 properties worth Rs 1,600 crores, till date.
The benami transactions law has wider ramifications for real estate investments, than other investments. The requirement to link your Aadhaar number with your immovable property, may cover the transactions of registrations that are undertaken after the law comes into force. It may also require the furnishing of the Aadhaar number, for immovable properties already owned by you.
Impact of requirement to quote the Aadhaar number, at the time of registration of the property
Once the requirement of quoting Aadhaar number for registration of new immovable properties comes into operation, the practice of buying and registering any immovable property in the name of any person who does not fund the purchase the property, will come to a halt. Moreover, the practice of buying immovable property in fictitious names, will also come to an end. In case someone still attempts to do the same, this will be detected by the I-T Department, sooner rather than later. With the increased use of technology and the all-pervasive nature of Aadhaar, the I-T Department will be in a far better position, to verify whether the person in whose name the property is purchased, has income commensurate with the investments in property standing in his name.
Since all immovable properties will be mapped with Aadhaar numbers, in case more than one property is purchased by a person, it will also be detected and make the task of the I-T Department easy, in detecting tax evasion through benami transactions in real estate. The use of black money may reduce due to this requirement, as only the person who has the funds will be able to buy the property. Hence, real estate prices will become stable and the abnormal volatility/speculation in prices, will reduce.
Impact of requirement to furnish Aadhaar number, for properties already registered and purchased
In due course, the government may mandate all the legal owners of immovable properties, whether land or building, to furnish their Aadhaar number to the office of registrar, where the properties are registered. When all the data are collated and analysed with the help of technology, it will be easy for the I-T Department to detect investments made in benami or fictitious names, based on the PAN number, which is already linked to the Aadhaar number.
With the linking of bank accounts, mobile connections, investments and PAN card to the 12-digit Aadhaar number, the government will be able to use advanced data mining techniques, to find out inconsistencies and proceed with the properties, which are not mapped with any Aadhaar number. This will mostly happen, in the case of properties purchased in fictitious names.
Since the provisions of the Benami Transactions Act, provide for treating the transfer of such property as void, the beneficial owners (the person who has provided the funds to buy the property) will not be able to claim the property from the benamidar (the person in whose name the property is purchased). These moves will ensure that the use of black money in the real estate is reduced significantly.
It will force people to buy properties in their own names, rather than in the name of fictitious persons or some benami name.
The income tax laws also requires you to offer notional rent on all the properties owned by you, except one which can be treated as self-occupied. This requirement is often not followed by tax payers. Linking of Aadhaar, will also ensure that the income earned from such properties is disclosed in the income tax returns, thus, enhancing the collection of direct taxes.
(The author is a tax and investment expert, with 35 years’ experience)