India hunts hidden cash

Mansions owned by maids, gardeners and drivers until now have aroused little suspicion in India, where the wealthy have long hidden fortunes in the names of lowly-paid staff to avoid paying tax.

But as the government broadens its crackdown on corruption, a new law promises to end the widespread practise and hundreds of suspicious bank accounts are under investigation.

"There's been an overnight change in the system," real estate lawyer Naresh Gupta told AFP, describing the new rules as "very draconian".

"Investigators can question anyone and ask any government department for information about suspects."

The law banning so-called "benami" transactions, making it illegal for assets to be hidden in another's name, came into effect in November as part a twin strike by the government to flush out undeclared "black money" hoarded by tax evaders.

Holding real estate in someone else's name has been a particularly popular avenue for those seeking to legitimise black money and dodge their tax dues.

Those caught out could have their wealth seized, face a seven-year jail term and pay hefty fines equivalent to 25 percent of the asset's value.

Government officials say 235 suspicious accounts were under investigation for alleged benami activity in mid February, with more than half frozen and properties seized.

But Prime Minister Narendra Modi, who was elected in 2014 on a pledge to wipe out corruption and kickstart the economy, has promised more scalps as the dragnet widens.

"It has some very tough provisions. Those holding such property should start consulting their (accountants)," he said in a February speech.

The law was in step with November's controversial "demonetisation", which forced Indians to turn in their old, devalued banknotes in exchange for new ones.

Those declaring suspiciously-large sums were red flagged for audit by the tax department, which often uncovered complex and implausible webs of benami holdings.

There is no hard data on what percentage of transactions in India are benami and could fall foul of this law. But experts agree the practice is rife and long overdue for scrutiny.