Many of you might have heard about Benami Property Transactions Act. It has been in existence since 1988. If you are still unaware of this Act, its high time that you know a few important things about it. The term “benami” is trending these days because recently the Act was amended by the government. The amended act, also known as Benami Transactions (Prohibition) Amendment Act, 2016 came into effect on November 1, 2016. The act seems to give government new powers to fight corruption and nab black money holders, at least on paper.
The meaning of benami in hindi is “without a name”. Therefore, properties which people buy but not under their own name are termed as benami properties. People often spend their black money to buy assets in the name of their family members to save their taxes. The PBPT Act has been amended to curb this illegal practice.
Transactions involved in purchasing benami properties are called benami transactions. The person who is the owner of the property on paper or the person on whose name the property is purchased is called benamdar. If you purchase any property in this way, it will be considered benami. Such property can be of any kind like movable, immovable, tangible, intangible, any right/interest or legal document, etc.
If a person who buys a property but the consideration for the purchase is paid by someone else.
If the property in question is held by someone for the benefit of the person who paid consideration for the property.
If the property is held, carried out or made under a fictitious name. If the owner of the property is not aware of the ownership of property or denies knowledge of such ownership.
If the person who paid consideration for the property cannot be traced.
If the member of an HUF holds the property for his benefit or for the benefit of any other member of HUF & the consideration for the property is paid in full out of known sources of HUF.
If the property is held by a person, on behalf of another person in a fiduciary capacity & includes a trustee, executor, partner, director of company, etc.
If a person buys assets in the name of his spouse or kids for which the payment was done from known sources of income then such asset or property is not considered benami property. If a person purchases any property jointly with brother or sister or relatives for which the required amount was paid from known sources, then also the property does not fall in the category of benami properties.
The PBPT Act defines benami properties and benami transactions and prohibits them. It also prescribes punishment and penalties applicable when laws are violated. It gives the government powers to confiscate, properties held benami without being liable to pay any compensation. It also prohibits benamdar (owner on paper) from transferring the property to the real owner.
Violation of PBPT Act can put a person behind bars for as long as 7 years. The culprit can also be fined for it. The quantum of fine can be up to 25% of Fair Market Value of the benami property.