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Benami Transactions : ALL YOU NEED TO KNOW
The Govt of India is taking many steps towards eliminating the black money dealing and have came out with various acts in procuring it. In the same manner the government in order to eliminate the benami transactions came with an amendment in the previous act The Prohibition Of Benami Property Transactions Act, 1988 . The new Benami Transactions (Prohibition) Amendment Act, 2016 came with 71 updated sections and became effective from 1st November, 2016.
In order to understand the logic or objective behind this amendment we first need to understand what does Benami actually means. “Benami” is a Hindi word meaning “without name” or “nameless”. This Act uses the word ‘benami’ to define a transaction in which the actual beneficiary is not the one in whose name the property is purchased – who is basically an identity cloak – the “benamidar”. In order to prevent such transactions govt. came with such an amendment so that beneficial owners keeps the properties in their own name and eradicate the legal complexities and bring transparency as to who is the real owner of the assets.
What Is Benami Property
Benami Property as defined under the act states that any property which includes assets of any kind, whether movable or immovable, tangible or intangible, corporeal or incorporeal which involves any benami transaction and includes the proceeds or considerations received from the property.
What are Benami Transactions
Before understanding the concepts of the Benami Transactions, let us have a look on the example to understand it better :
Mr. Ram
(Seller of Property)
Mr. Shyam
(Benamidar)
Gets the registry of property in his name
Mr. Hari
(Beneficial Owner)
He pays for the property
In the example we can see that Mr. Hari pays for the property and gets the property registered in the name of Mr. Shyam in order to save him from legal consequences. Such type of transactions are called as Benami Transactions.
Types of Benami Transaction
- A transaction or an arrangement—
- a) Where a property is held by any other person, and the consideration for such property has been paid by, another person;
- b) Where the property is held by any other person for the immediate or future benefit, direct or indirect, of the person who has financed the property
- Where the transaction of the property is carried out or made in a fictitious name;
- Where the owner of the property is not aware of, or denies knowledge of, such ownership;
- Where the person providing the consideration for the property is not traceable or is fictitious;
Exceptions – Which transactions are not in ambit of Benami Act
- If the property is jointly held with sister, brother or any lineal ascendant/descendant and the financing has been done by the known sources of individual
- In case of HUF, the property is held for the benefit of members of HUF and consideration or financing has been done by known sources of HUF
- In case the property is held by the spouse or a child and consideration or financing has been done from the known sources of individual
- In case the property is held in the fiduciary capacity of any other entity or person
Legal Implications of a Benami Transaction
1.Where any property, which comes under the ambit of benami transaction, shall be liable to be confiscated by the Central Government. The consequences of the same are as follows :
- Imprisonment between 1 to 7 years and
- Fine up to 25% of the fair market value(FMV) of the property
Where a person provides or furnishes false information in any proceeding under the act, he shall be punishable with:
- Imprisonment between 6 months to 5 years and
- Fine up to 10% of the fair market value (FMV) of the property
- The benami property held by the benamidar would not be transferrable to the beneficial owner or any other person on his behalf. In case the property is re-transferred by contravening the provisions of the act, the transaction of such property shall be deemed to be null and void.
