Recently, Govt. has introduced a law which has given a sudden jolt to the real estate sector. But the fact is, it is not only the real estate sector which would be affected by this law but it would have an impact on all types of properties be it movable or immovable. This law is called the Benami Transaction Act. Although, It is not a new act and it was originally created way back in 1988 but it was only the recent amendment brought in 2016 which has made a complete overhaul of this act and has made it really strong. But, of course, you might be thinking right now; what is it? How does it affect me? why should I concerned about it? Well, you’ll get to know all these things by the end of this article. So, Let’s analyze it in a very simple language and step by step:-
Benami literally means something “without a name”. Therefore, you could easily assume it that any property without a legal name and the valid owner is called Benami. It is a Property which is purchases/sold under a Benami Transaction and it also includes the money involved in such property.
Property here means; assets of any kind, whether movable or immovable, tangible or intangible and it will include any right, interest, title to any property.
Benami Transaction means; a transaction or an arrangement where:
It is generally used to enter into by the people who have unaccounted money; more commonly known as Black money. People make the Benami Transactions to hide their name and use the black money in various types of properties in such names which is either fake or which are not under the lenses of tax departments.
Also, Another reason for entering the Benami Transactions is to hide the true ownership of the property from their lenders, creditors, and banks etc.
In any Benami Transaction the following parties are involved:
(ii) Beneficial Owner: It is the person who has provided the consideration for purchase.
The people who have entered in any way transactions which are covered under Benami especially the one who has the Black Money and invested the same into Benami Transactions would be hugely affected by this act. They have to bear the Huge penalties and prosecutions under the Act. Also, the real estate sector would be certainly impacted with this and every party involved must be very clear about the true ownership of the property.
People who have taken properties from their genuine sources and for their own direct benefit would not be affected by this law.
The Act prescribes the different penalties and prosecutions for different defaults which are as follows:
Where any person enters into a Benami Transaction the beneficial owner, benamidar and any other person who supports any person to enter into the benami transaction shall be guilty under the act and punishable with rigorous imprisonment for a term between 1 year to 7 years (+) shall also be liable to fine which may be extend up to 25% of the Market Value of the Property.
Any person who is required to furnish information under this Act knowingly gives false information to any authority or furnishes any false document in any proceeding under this Act, shall be punishable with rigorous imprisonment for a term between 6 months to 5 years (+) shall also be liable to fine which may extend up to 10% of the Market value of the Property.
[Note: An offence under this Act shall be non-cognizable which means it will need a warrant before arresting any such person.]
Where a company is contravening any provision of this Act, then the Company itself AND Every Person (including Director, manager, secretary, CEO etc.) who was responsible for such Transaction shall be deemed to be guilty of the contravention; and shall be liable to be proceeded against and punished accordingly. But if such person proves that such transaction was made without his/her knowledge then such a person would not be considered as guilty.
Important Note: Here;
Company shall mean: Company, Firm, & AOP/BOI
Director shall mean: Director, Partner, Any Member in case of Company, Firm & AOP/BOI respectively.
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