Monday, September 12, 2016

Amendments to Benami Transactions (Prohibition) Act, 1988

All you need to know about benami transactions Bill

INTERNET DESK

July 21, 2016

The Act prohibits benami transactions and provides for confiscating benami properties

The Benami Transactions (Prohibition) Amendment Bill, 2015 was introduced in Lok Sabha on May 13, 2015. The Bill seeks to amend the Benami Transactions Act, 1988. The Act prohibits benami transactions and provides for confiscating benami properties.

The Bill seeks to: (i) amend the definition of benami transactions, (ii) establish adjudicating authorities and an Appellate Tribunal to deal with benami transactions, and (iii) specify the penalty for entering into benami transactions.

1. The Act defines a benami transaction as a transaction where a property is held by or transferred to a person, but has been provided for or paid by another person. The Bill amends this definition to add other transactions which qualify as benami, such as property transactions where: (i) the transaction is made in a fictitious name, (ii) the owner is not aware of denies knowledge of the ownership of the property, or (iii) the person providing the consideration for the property is not traceable.

2. The Bill also specifies certain cases will be exempt from the definition of a benami transaction. These include cases when a property is held by: (i) a member of a Hindu undivided family, and is being held for his 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 a fiduciary capacity; (iii) a person in the name of his spouse or child, and the property has been paid for from the person’s income; and 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.

3. Under the Act, an Authority to acquire benami properties was to be established by the Rules. The Bill seeks to establish four authorities to conduct inquiries or investigations regarding benami transactions: (i) Initiating Officer, (ii) Approving Authority, (iii) Administrator and (iv) Adjudicating Authority.

4. If an Initiating Officer believes that a person is a benamidar, he may issue a notice to that person. The Initiating Officer may hold the property for 90 days from the date of issue of the notice, subject to permission from the Approving Authority. 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 is passed to continue holding the property, the Initiating Officer will refer the case to the Adjudicating Authority. The Adjudicating Authority will examine all documents and evidence relating to the matter and then pass an order on whether or not to hold the property as benami.

6. Based on an order to confiscate the benami property, the Administrator will receive and manage the property in a manner and subject to conditions as prescribed.

7. The Bill also seeks to establish an Appellate Tribunal to hear appeals against any orders passed by the Adjudicating Authority. Appeals against orders of the Appellate Tribunal will lie to the high court.

8. Under the Act, the penalty for entering into benami transactions is imprisonment up to three years, or a fine, or both. The Bill seeks to change this penalty to rigorous imprisonment of one year up to seven years, and a fine which may extend to 25% of the fair market value of the benami property.

9. The Bill 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.

10. Certain sessions courts would be designated as Special Courts for trying any offences which are punishable under the Bill.



Also read the related stories

Benami Transaction Bill 2015 at Glance

Sanyam Jain |  General/ News |  May 16, 2015 |

In an attempt to restrain the generation of black money in domestic market, the Government has introduced a bill to target Benami Transactions in real estate sector. The Parliament has already cleared the much awaited Black Money Bill to nab those stashing black money abroad. The Benami Transaction Bill aims to nab those enters in benami transaction to evade tax or to avoid payment to creditors, in domestic market.

The Benami Transaction (Prohibition) Act was first conceded in 1988 but had several loopholes and finally withdrawn. Later on, UPA 2 government introduced the bill in parliament but could not be become the act due to dissolution of the 15th Loksabha.

Finally, the NDA Government has introduced the Amended Benami Transaction Bill which got cleared by Loksabha and now headed towards Rajyasabha for approval.

Key Points of Benami Transaction Bill 2015

1. What does word Benami means?

Benami word is originated from Persia which means “No Name” or “Without Name”. In this benami transaction bill, the word benami is used to point out the transaction in which the owner of the property is not the actual/real beneficiary of the property.

2. What is Benami Transaction?

Benami Transaction means the transaction in which the person who pays for the property does not hold/own the property and the person who hold/own the property is not the one who pays for it.

In simple words the amount is paid by one person and the property is held by another person for direct or indirect benefit to the payer.

3. What will not be considered as Benami Transactions?

Following transactions are not considered as Benami Transactions and are excluded from the scope of the Benami Transaction (Prohibition) Bill, 2015:

1. Property held in the name of the children or spouse through know income sources;
2. Property jointly held with brother, sister or lineal ascendant or descendant for which the amount is paid out of known sources of income;
3. HUF buying property in the name of the Karta;
4. Property held by someone in fiduciary capacity such as a trustee, executor, partner or director of a company.

4. What is the nature of transactions which will be considered as a benami transaction?

Benami Transactions includes:

1. Transactions which are carried out in bogus names; or
2. Where the person who owns the property denies knowledge of the ownership; or
3. Where the person who paid consideration for the property i.e. real beneficiary is not traceable or fictitious.

Further, Benami Transactions shall include assets (movable or immovable, tangible or intangible), any right or interest, legal documents, even gold or financial securities could qualify to be Benami.

5. Will Benami Property be confiscated?

The property involved in benami transaction could be confiscated as soon as the order of initiation of proceedings against the benami transaction is authorized by the competent authority.

6. What is the proposed fine or punishment under the Benami Transaction Bill?

The person found guilty may have to face rigorous imprisonment for a period not less than one year and which may be extended to maximum of seven years.

In addition to imprisonment, there would be a penalty of 25 percent which will be calculated on the fair market value of the property.

Further, any person who is asked to furnish any information under this act, if intentionally provides false information shall face rigorous imprisonment of not less than six months which may extend up to five years along with the fine of 10 percent of the market value of the property.

7. How will the market value be ascertained?

Market value of the concerned property would be taken as the value that property would fetch on sale in open markets or in any other case, help of the registered valuer will be taken.

Sources: http://www.simpleinterest.in

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