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Benami Transactions Bill

Is this the brain child of Modi government? The answer is NO. Benami Transactions (Prohibition) Act was enacted in 1988. Actually, it was in 1973 that the Law Commission of India recommended to formulate an Act to curb Benami Transactions! So, it took 15 years for the government to make one law. But hold on, though they made an Act in 1988, the relevant rules were not framed and hence, in 2011, a new and amended bill was brought in called ‘Benami Transactions (Prohibition) Act, 2011’ by UPA government. However it has not been passed in the Parliament till date!!

 

What is a Benami Tranaction?

It means (a) property is held by a person on behalf of another person who has paid for it or (b) the transaction is made for a property in a fictitious name.

 

Property refers to assets of any kind, whether movable or immovable, tangible or intangible, and includes any right or interest in such goods. Any owner failing to provide a proven source of earning that would allow him or her to own an asset could risk it being termed benami.

 

What happens if one makes property in Benami name?

The Bill prohibits all persons from entering into benami transactions. Any property held in benami shall be confiscated by the central government. Once a property is confiscated, it’s title will go to the central government and no compensation shall be payable. However, any transaction entered into by an individual in the name of his spouse, brother or sister, or any lineal ascendant or descendant are not to be considered benami.

 

The authorities for the purpose of this Act shall be with the Income Tax department.

 

The procedure

The procedure is similar to any other inquiry in the court of law. Initially, a notice will be sent to benamidar and call for documents for inquiry. Once the hearing is over, the officer may make an order for the confiscation of the property. The aggrieved party (benamidar) can go for appeal with higher authorities (going upto High Court and Supreme Court)

 

Punishment

Any person who enters into benami transactions, or abets or induces another person to enter into such transactions shall be punishable with an imprisonment for six months to two years, and liable to a fine of up to 25 per cent of the fair market value of the property held in benami. In addition, any person who wilfully gives false information shall be liable to an imprisonment of three months to two years and a fine of up to 10 per cent of the market value of the property

 

This Act should get passed in the Parliament soon. Hopefully, this will give more teeth to the government to unearth black money in India. Especially, the real estate transactions will see ‘genuine buyers’ than fictitious buyers! I am skeptical whether the government will be sincere in operationalising the benami law.

 

Thought for the day

Cheating is a choice, not a mistake.

 

 

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About CA Prasad Chartered Accountant

CA Prasad Chartered Accountant
CA Prasad is a practicing Chartered Accountant and partner in Bangalore -based CA Firm. For further information or query, please email it to [email protected]