To deal with the problem of black money, especially in the real estate sector, the government has introduced a Bill to target transactions
that are carried out in other people’s names. SHRUTI SRIVASTAVA gives details of the law, and where it gets its teeth.
What is a ‘benami’ transaction?
A transaction is considered benami (literally ‘nameless’ or ‘without a name’) when the consideration for a property that is transferred to a person or is held by him/her is paid by another person.
In such transactions, the person who pays for the property is the ultimate beneficiary of the property, directly or indirectly, in the future. Such a property is considered benami, and is illegal under the Benami Transaction (Prohibition) Amendment Bill, 2015.
The Bill, which was introduced in the Lok Sabha on Wednesday, also includes property transactions carried out in fictitious names, or where the owner of the property denies knowledge of ownership, or where the person paying the consideration for the property is not traceable or is fictitious.
What does the Bill intend to do?
A Benami Transactions (Prohibition) Act was passed in 1988 to put an end to such transactions, and to empower the government to recover such property. The Act, however, had several inherent loopholes — including the absence of an appellate mechanism, and lack of provisions for vesting of the confiscated property with the Centre. Owing to these infirmities, the Rules for the Act were also not framed.
The UPA 2 government introduced a Benami Transactions (Prohibition) Bill, 2011, to replace the 1988 Act. However, the Bill lapsed with the dissolution of the 15th Lok Sabha. The NDA government has now introduced the Bill with amendments to make it stronger and target benami transactions. The Bill seeks to ensure that if any person enters into a benami transaction in order to evade tax or avoid payment to creditors, the ultimate beneficiary owner and persons who abet or induce any person to undertake such a transaction, suffer rigorous imprisonment.
So, who will not attract the Bill’s provisions?
Those who buy property through known source of income in the names of their spouse or children, brother and sisters or lineal ascendant or descendant where their names appear as joint owners in the document; a karta of the Hindu undivided family; and a person standing in fiduciary capacity for the benefit of another person, such as a trustee, executor, partner or director of a company, are excluded from the scope of the Bill.
What penalities are proposed for the guilty?
Those found guilty of having violated the provisions of the proposed law face rigorous imprisonment for a term not less than one year, but which may go up to seven years, along with a fine which may extend to 25 per cent of the fair market value of the property. If any person who is required to furnish information under this Act knowingly furnishes false information, he/she will face rigorous imprisonment of not less than six months, but which may extend to five years, along with a fine of 10 per cent of the fair market value of the property.
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