BENAMI TRANSACTIONS

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BENAMI TRANSACTIONS

BENAMI TRANSACTIONS

Government has introduced a law which will affect the real estate sector as well as other properties- movable or immovable. This law is called the Benami Transaction Act.

Benami Property

Any property without a name or valid owner is called Benami property. It includes property which is sold or purchased under the Benami Transaction and also includes money involved in such property.

Property here means– Any kind of asset,

. Movable or immovable

. Tangible or intangible

And will include title, right or interest to any property.

 

Benami Transactions

A Benami Transaction is said to be an arrangement where-

.  A property has been transferred to a person but the consideration is paid by another person and the property is held for the ultimate benefit of the person who paid the consideration.

.  The property is purchased in a fictitious name.

. The property is purchased in such a manner that the owner (as per documents) is not aware of the ownership.

.  Consideration given by the person is fictitious or not traceable.

Exceptions to Benami Transactions-

Exceptions would be in cases where the property is held by-

.  Karta/member of HUF. The property is held for the benefit of the members of HUF or for his own benefit and the consideration is paid by known sources for HUF.

NOTE: If property is purchased by one member in the name of another member, it is not an exception.

.  A Person standing in a fiduciary capacity. If a person holds any property –

movable or immovable for the benefit of the person towards whom he stands in such capacity, it will not be considered as a Benami transaction.  

.  Any Individual buying property in the name of his/her spouse or in the name of any child & consideration for such property is coming from the known sources of such individual.

.  Any Individual buying property in the name of brother or sister or lineal ascendant/ descendants, where the name of brother or sister or lineal ascendant/descendant and the Individual appear AS JOINT-OWNERS in any document & consideration for such property is coming from the known sources of such individual.

Why are people involved in Benami Transactions:

.  Entered by people who have unaccounted income (Black money)

.  Entered by people to hide the true ownership of property from lenders, creditors, banks etc.

Parties involved in Benami transactions:

.  Benamidar – Person in whose name the property has been purchased.

.  Beneficial owner – Person who has provided the consideration for purchase of property.

.  Seller – Person selling the property.

Penalties and Prosecution :

.  Penalty for Benami Transactions- Person entered under Benami transaction will be punishable with rigorous imprisonment for a term between 1 year to 7 years and shall also be liable to fine which may extend up to 25% of the Market Value of the Property.

.  Penalty for False Information– Any person, who is required to provide information under the act and knowingly provides false information or false document, shall be punishable with rigorous imprisonment for a term between 6 months to 5 years and shall also be liable to fine which may extend up to 10% of the Market value of the Property.

 Other restrictions:

.  Benami property liable for confiscation– Any property under the benami Transaction shall be confiscated by the Central Government without payment of any compensation.

.  Prohibition on re-transfer of property by benamidar– If Benamidar transfers Benami property held by him to the beneficial owner or any other person acting on his behalf, such transaction would be null or void.

Some other Important Points:

.  The Central Govt. shall appoint Adjudicating Authorities which will see the cases of Benami Transactions and take the relevant actions against the  same.

.  The officers of other departments e.g. income tax authorities, officers of CBIC, officers of any recognized stock exchange, officers of SEBI, officers of RBI, Police, officers of enforcement directorate under FEMA etc would extend their assistance to the Adjudicating Authorities.

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