The Benami Transactions Act, 2016 has recently been passed by the government. Read further to understand the provisions of the act.

What is Benami Property?

Benami essentially means property without a name.  In this kind of transaction the person who pays for the property does not buy it under his/her own name.  The person on whose name the property has been purchased is called the benamdar and the property so purchased is called the benami property.

What constitutes Benami property?

“Benami Transactions” means,—

(A) a transaction or an arrangement—

(a) where a property is transferred to, or is held by, a person, and the consideration for such property has been provided, or paid by, another person; and

(b) the property is held for the immediate or future benefit, direct or indirect, of the person who has provided the consideration

except when the property is held by—

(i) a Karta, or a member of a Hindu undivided family, as the case may be, and the property is held for his benefit or benefit of other members in the family and the consideration for such property has been provided or paid out of the known sources of income of the Hindu undivided family;

(ii) a person standing in a fiduciary capacity for the benefit of another person towards whom he stands in such capacity and includes a trustee, executor, partner, director of a company, a depository or a participant as an agent of a depository under the Depositories Act, 1996 and any other person as may be notified by the Central Government for this purpose;

(iii) any person being an individual in the name of his spouse or in the name of any child of such individual and the consideration for such property has been provided or paid out of the known sources of income of the individual;

(iv) any person in the name of his brother or sister or lineal ascendant or descendant, where the names of brother or sister or lineal ascendant or descendent and the individual appear as joint-owners in any document, and the consideration for such property has been provided or paid out of the known sources of income of the individual; or

(B) a transaction or an arrangement in respect of a property carried out or made in a fictitious name; or

(C) a transaction or an arrangement in respect of a property where the owner of the property is not aware of, or, denies knowledge of, such ownership;

(D) a transaction or an arrangement in respect of a property where the person providing the consideration is not traceable or is fictitious;

Explanation : for the removal of doubts , it is hereby declared that benami transaction shall not include any transaction involving the allowing of possession of any property to be taken or retained in part performance of a contract referred to in Section 53A of transfer of Property Act 1882, if, under any law for the time being in force-

  1. Consideration for such property has been provided by the person to whom the possession of the property has been allowed but the person who has granted possession thereof continues to hold ownership of such property ;
  2. Stamp duty on such transaction or arrangements has been paid; and
  3. The contract has been registered

Property that does not stick to the following criteria:

  • Property held in the name of spouse or child for which the amount is paid out of known sources of income
  • A joint property with brother, sister or other relatives for which the amount is paid out of known sources of income.
  • Property held by someone in a fiduciary capacity, that is, transaction involving a trustee and a beneficiary.

What falls under benami transaction?

Assets of any kind — movable, immovable, tangible, intangible, any right or interest, or legal documents. As such, even gold or financial securities could qualify to be benami.

Four authorities to conduct inquiries or investigations regarding benami transactions:

  • Initiating Officer,
  • Approving Authority,
  • Administrator and
  • Adjudicating Authority

 

  • 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.
  • 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
  • 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.
  • 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.

Offence & Prosecution

  • Whoever is found guilty of the offence of benami transaction referred to in sub-section (1) shall be punishable with rigorous imprisonment for a term which shall not be less than one year, but which may extend to seven years and shall also be liable to fine which may extend to twenty-five per cent. of the fair market value of the property.
  • Furnishing false information is punishable for a term which shall not be less than six months but which may extend to five years and shall also be liable to fine which may extend to ten per cent. of the fair market value of the property.
  • Properties held Benami are liable for confiscation by government without compensation
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