What is Benami Transaction (Prohibition) Amendment Act?
The Benami Transactions (Prohibition) Amendment Act, 2016, provides for rigorous imprisonment of up to seven years, and a fine which may extend to 25% of the fair market value of a benami property.
It also empowers the the government to confiscate deposits of people using another persons account to convert unaccounted wealth into white money.
What is ‘benami’ property and transaction?
As a usual practice, to evade taxation, people invest their black money in buying ‘benami’ property. The real owners of these properties are hard to trace due to fake names and identities.
The word ‘Benami’ gets its derivation from the Hindi terminology, which means ”without a name”.
- Property bought by an individual but not under his name is called ‘benami’ property.
- It can include property held in the name of spouse or child, paid out of unknown sources of income. A joint property with brother, sister or other relatives, where the amount for such property is paid out of unknown sources of income also falls under ‘benami’ property.
- Therefore, the transaction involved in the acquiring benami property is termed as ‘benami transaction’.
- Benami transactions include buying assets of any kind — movable, immovable, tangible, intangible, any right or interest, or legal documents.
- The Bill defines ‘benamidar’ as the person in whose name the benami property is held or transferred, and a ‘beneficial owner as the person for whose benefit the property is being held by the benamidar
The PBPT Act, prohibits the real owner from recovering the benami property from the benamidar.
Properties held ‘benami’ are liable for confiscation by the Government without payment of compensation.
Benami Transactions (Prohibition) Amendment Act, 2016
The Benami Transactions (Prohibition) Amendment Act, 2016, introduced in the Lok Sabha on May 13, 2015. The new Act amends the Benami Transactions Act, 1988. The Act prohibits benami transactions and also provides for the confiscation of benami properties.
1. The Act defines a benami transaction refers to a transaction where property is held by or transferred to one person, but has been provided for or paid by another person. The Bill amends this definition to add other transactions qualifying as s benami, it includes property transactions where: (i)transaction are made fictitious names, (ii) the owner is not aware or denies knowledge about the ownership of the property, or (iii) moreover, the person providing the consideration for the property cannot be traced.
2. The Act also specifies certain cases exempted from the definition of a benami transaction. The cases include property held by: (i) a member of a Hindu undivided family holding property for his benefit or another family member’s benefit, and has been provided for or paid off from sources of income of that family; (ii) a person in fiduciary capacity; (iii) also includes any person in the name of his spouse or child, and the property has been paid for from the person’s income.
3. The Act, seeks to establish four authorities to conduct inquiries or investigations regarding benami transactions namely; (i) Initiating Officer, (ii) Approving Authority, (iii) Administrator, (iv) Adjudicating Authority.
Disclosure of Benami Property:
4. If an Initiating Officer believes, a person to be a ‘benamidar’, he may issue a notice to the ‘benamidar’ person. The Initiating Officer may hold the benami property for a period of 90 days, from the date of issue of the notice. However, the issue of notice is subject to permission from the Approving Authority. Subsequently, at the end of the notice period, the Initiating Officer may pass an order to continue the holding of the property.
5. If an order, passed to continue holding the property, the Initiating Officer, refers the case to an Adjudicating Authority. The Adjudicating Authority examines all documents and evidences relating to the matter and then pass an order, to hold or not to hold the property as ‘benami’ property.
6. If an Orders thus passed to confiscate the benami property, subsequently, the Administrator receives and manages the property in a manner prescribed as per conditions of the order.
7. The Act, establishes Appellate Tribunals to hear appeals against any orders passed by the Adjudicating Authority. Appeals against orders of the Appellate Tribunal lie with the the High court.
8. Furthermore, the Act, provides for penalty on entering into benami transactions. The penalty provides for rigorous imprisonment of up to seven years, and a fine which may extend to 25% of the fair market value of a ‘benami’ property. And also includes empowers the government to confiscate deposits of people using another persons account to convert unaccounted wealth into white money.
9. The Act also specifies the penalty for providing false information to be rigorous imprisonment of six months up to five years, and a fine which may extend to 10% of the fair market value of the benami property.
Tax evaders invest their accumulated illegal money(black money) in buying benami properties. The whole process affects the tax of the government in turn hindering the growth and development of State’s. Since the percentage of tax payer in the country is considerably low, a tough law against benami properties is the need of the hour.