CA Pratik Anand
With the Government bringing de-monetisation to curb black money. It has also been said by the Prime Minister that the next target of the Govt. would be Benami Property. Here we are going to see all about benami property or benami transactions.
Ques: What is Benami Transaction? What is Benami Property?
Ans: Benami Property can be any property whether movable or immovable, the source and ownership of which is not known. When the owner of the property is not able to define the source of funding of the property, the property could become benami.
Ques: How does Benami transaction take place?
Ans: Benami transaction takes place between two parties. On the one hand is the beneficial owner of the property who pays the consideration for the benami transaction. On the other hand is the owner of the property in whose name the property has been purchased, such person is called the benamidar.
Ques: What are the conditions to be filled for a transaction to be classified as Benami?
Ans: As per the Benami Transaction (prohibition) Amendment Act’ 2016:
A transaction shall be regarded as a Benami Transaction if it fulfils the following two conditions:
1) Property is held by or transferred to any person for which the consideration is paid by another person and
2) The property is held for the benefit or future benefit, either directly or indirectly, for the person who has provided such consideration;
Ques: Whether Benami Property includes only Immovable property?
Ans: As per the Benami Property Transactions Act, Benami property includes both immovable property (like land or building) and movable property/assets.
Here, an important point to be noted is that in case of the ongoing process of de-monetisation, if a person deposits old currency in the account of another person with the understanding that the account holder will return the money in new currency can also be regarded as a benami transaction. Here, the Tax department can issue notices under the Benami property Act also.
The person who deposits old currency in the bank account shall be treated as beneficial owner and the person in whose bank account the old currency has been deposited shall be categorised under as a benamidar.
Ques: What are the transactions that are also included in the definition of Benami Transaction?
Ans: Following are also considered as Benami Transactions:
Ques: Why do people enter into benami transactions?
Ans: Many people want to know why anyone enters into benami transactions.
Some of the reasons for entering into benami transactions are:
1) People who enter into Benami transactions are those who have money earned from unknown sources i.e black money. Therefore, in order to utilise the black money, these persons enter into benami transactions where the transaction is done in the name of another person but the consideration is paid by another person out of his black money. Since these persons cannot show the transaction in their own names therefore they use names of other persons or some fictitious names for entering into such transactions.
2) Another reason for entering into benami transactions is that people want to hide the ownership of the benami property from their creditors or from the banks in case where such people have taken loans from such banks. Some people also want to hide the ownership from their relatives.
Ques: What are the transactions that are not classified as benami transactions?
Ans: As per the Benami Transactions Amendment Act’2016, following transactions are not classified as Benami Transactions:
1) If the property is held by a Karta or any member of the HUF and the property is held for the benefit of the members of the HUF and the consideration for such property has been paid through known sources of the HUF.
2) A person standing in the fiduciary capacity for the benefit of another person towards whom he stands in such capacity. Ex: A trustee, a director of the company.
3) In case of an individual, where the property is in the name of the spouse or in the name of any child of the individual and the consideration for such property has been paid out of known sources of the individual.
4) In case of an individual, in the name of his brother or sister or lineal ascendant or descendant and where the names of the individual and brother/sister or lineal ascendant or descendant appear as joint owners.
Ques: What can be the consequences of entering into Benami Transactions?
Ans: Following are the consequences of entering into Benami transactions:
Ques: What would be impact of the amendment to the Prohibitions of Benami Transactions Act on Black Money in wake of the recent de-monetisation of the currency?
Ans: Some of the impact of the Amendment to the Benami Act would be as follows:
There might be some other impacts of the Benami Act such as:
The enactment of the amended Prohibition of Benami transactions is a major step by the Govt. to curb the flow of black money, however it is also equally important to protect all the genuine commercial transactions from the ambit of the Amended Benami Act.
The author is the founder of youronlinefilings.com an online platform for filing income tax returns, company incorporation, accounting/bookkeeping, audits, Fema related compliances etc. He can be contacted at: firstname.lastname@example.org or email@example.com and Mobile: +91-9953199493
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