Vipin Kumar Khatri

The Prohibition of Benami Property Transactions Act, 1988 has been in force since the year 1988 but it got more teeth subsequently, through an amendment act passed on 01.11.2016 i.e. The Benami Transactions (Prohibition) Amendment Act, 2016.

As our economy under the leadership of our honourable Prime Minister Shri Narendra Modi has waged a war on black money, these amendments along with demonetisation are seen as a war conch being blown.

In this article we shall simplify the provision of Benami Act in a question and answer format.

Q 1:-   What is a Benami Property?

A 1:- Any property purchased from a benami transaction and also includes the proceeds from such property.

Q 2:-   What can be called a property?

A 2:-  As per section 2(26) of The Prohibition of Benami Property Transaction Act,1988 Property means an asset of any kind whether movable or immovable, tangible or intangible, corporeal or incorporeal and includes any right or interest of legal documents or instruments evidencing title or interest in the property and where the property is capable of conversion into some other form, then the property in the converted form and also includes the proceeds from the property.

Q 3:-  What is a Benami Transaction?

A 3:- If a person pays the consideration  for purchase of a property but the ownership of the property is held in the name of some other person, and the property is held for immediate or future benefit, direct or indirect, of the person who paid the consideration,

Or/and the owner mentioned in the document denies or is not aware of such ownership,

Or if the person providing the consideration in not traceable or is fictitious, such transaction shall be regarded as a benami transaction.

However such transactions for the benefit of following other persons shall not be regarded as benami transaction

– A Karta or a member of HUF

– A child, Spouse, Brother, Sister ascendant, descendent.

Some Examples of Benami Property:

1) Ramesh purchases and is in possession of a flat, for which the consideration was paid from the bank account of his driver.

2) Ajay purchases a property in the name of his friend paying the consideration in cash and property is in possession and control of Ajay. His friend is not even aware that he owns any such property.

3) Rattan is in possession of Jaguar car which was purchased in the name of some Cyrus who is neither traceable nor any source of income of Cyrus is known.

Q 4:-  What are the penalties for Benami Property?

A 4:-   The penalties under earlier benami law prior to November 2016 was maximum imprisonment for 3 years and fine or both but now the fine has been increased to 25% of fair market value of property and imprisonment of minimum 1 year and maximum 7 years for entering into any benami transaction.

Even if a person knowingly provides false information to any officer under this act, shall be liable for minimum 6 months to 5 years of imprisonment and shall also be liable for fine upto 10% of fair market value of property.

Confiscation: The Central Government can also confiscate such property held to be a benami property.

Q 5:- If I hold my property in the name of any company or partnership firm, is it also a benami transaction?

A 5 :-   Yes, such transaction may also be covered if it satisfies the consideration criterion mentioned in Ques. 3 above.

Q 6:- If a person possesses a benami property, can he transfer such property?

A 6:-   Any re-transfer of benami property by the benamidar (i.e. owner in documents) to the beneficial owner, shall be regarded as null and void i.e. not have taken place at all.

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