An Explainer: Benami Transactions
A Persian term that loosely translates into “something that does not have a name”, benami assumes a different connotation when we speak of it for property transactions. In a benami property transaction, the main beneficiary uses the name of a proxy to reap all the profits, without having to pay the required taxes. While unaccounted transactions are a method often used across segments, properties are the most popular asset class for high-networth individuals to park their money in. As taxes on such transactions are high, benami transactions are initiated to evade them. Due to such transactions, the government suffers a huge revenue hit every year while the data on market activity remains elusive.
To curb this menace, the Benami Transactions (Prohibition) Amendment Bill, 2015, was recently approved by Parliament. Now, for engaging in such transactions, you could face a jail term of as many as seven years while losing your ownership over the property. After implementation, the new law will bring the much-needed transparency in the real estate sector and help the government realise the full revenue potential of immovable assets.