Benami Property/Benami Transaction Simplified

By Lakshita Sharma 

(LLB from Law Faculty University of Delhi)

What does Benami Property mean?

As the term Benami itself indicates, it is something without having a name.  So, when an individual buys a property not under his/her name, it is considered as Benami Property.

Following are the 4 categories where a property is called Benami property as per the Act.

  1. Where consideration amount of property is paid by A, but the transfer of property is made under the name of another person named B.
  2. Where the person in whose name property is being transferred is a fictitious person or entity.
  3. Where the person in whose name property is being transferred, denies the knowledge regarding property transaction made in his/her name.
  4. Where the person who paid the consideration amount is fictitious or is untraceable.

Exceptions

  • In case the property is held in the name of the spouse or child.
  • Property held by individuals in joint names of self/sister/brother or lineal ascendants or descendants.
  • HUF property held in the name of Karta and payment is made by Karta or member of HUF.

*Provided consideration of amount is paid out of known sources of income.

What all covered under Benami Property?
It includes assets of any kind either movable, immovable, tangible, intangible, corporeal, incorporeal, legal document or any right or interest, property in converted form and proceeds from the property.

Benami Property covers not only land and houses but Benami transactions made to invest in shares, gold and other financial instruments are also considered as Benami property.

What is the Benami Transaction?

Such transactions which are made to hold property/assets on one person’s name, wherein funds for buying such property/assets have been provided by another person, ultimately for whose benefit the property is held.

In other words, where, the property is not bought on the name of the real owner, who is the real payer and beneficiary of such property/asset, but it is held on another person’s name.

Who is Benamdar?

Benamdar is the person on whose name such property has been bought with or without his/her knowledge of such transaction.

Why do people make Benami transactions?

Benami transactions have been used as a tool to convert black money into white money. As a usual practice, Tax evaders invest their accumulated illegal money in buying Benami properties. They use fake identities and fictitious names, which makes it hard for authorities to trace the whole transaction of buying property and source of consideration paid, real owner and who’s direct or indirect benefit the property is being held.

What are the laws prohibiting and penalizing Benami property transactions?

The original Act which was passed in 1988 as The Prohibition of Benami Property later was amended in 2016, which came into force on Nov.1, 2016. The amended version of PBPT Act has included the following penal provisions:

  • As per the provisions of a new law, once a property is declared as ‘Benami’, it will vest in government without any compensation or consideration.
  • Persons finding guilty in the matter of PBPT Act offence shall be liable to pay a fine which may extend up to 25% of the fair market value of the property and rigorous imprisonment up to 7 years.
  • The government is empowered to confiscate deposits of people using other accounts to convert illegally accumulated wealth into white money.
  • The new law has a retrospective effect as it is an amended version of the old law. Consequently, a property due to acquiring in and after 2016, can now be attached along with the application of penal provisions.

Conclusion

Since, India is the land of traditions, where it is common practice to hold the property on the name of the father as to mark respect but the consideration amount is paid by a child. In such probable cases, despite having the laudable intention the PBTA Act 2016 has a huge probability to cover genuine transactions under its rigorous provisions.

But till now it has proven to be a good attempt to book and penalize Benami property transactions and thus curbing the corruption directly as well as indirectly.

Source: estartindia.com

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