Explaining Benami Transactions Amendment Bill In 3 Steps

The National Democratic Alliance government's efforts to nab those trying to keep their assets hidden gained further ground recently as the Rajya Sabha gave its approval to a Bill that seeks to amend the Benami Transactions Act, 1988. The Narendra Modi-led government has already been successful in getting the Undisclosed Foreign Income and Assets (Imposition of Tax) Bill, 2015, passed in Parliament. With the Benami Transactions (Prohibition) Amendment Bill, 2015, getting a go-ahead from the Upper House, the Centre would be able to unearth valuable assets hidden within the country.

Let's understand in three steps how it all works:

The nature

Benami is a Persian term which means something that does not have a name. However, in legal terms, benami stands for a proxy. So, if an asset is benami, it would mean that A has used B's name to buy an asset, while A enjoys the benefits from it. In this case, the said asset is benami; A is the benamidar, while B is the proxy or the ostensible owner. Pretty much in practice, such transactions are used by individuals to evade paying taxes. This results in a major revenue loss to the government. The Benami law prohibits such transactions and provides for confiscating such properties. It has to be noted that properties held under the names of one's spouse or children, or properties jointly owned by siblings or other relatives, do not fall under benami properties. The properties held by someone in the fiduciary capacity (involving trust) also do not fall under this category.

Asset transactions of all kinds -- movable and immovable -- could be termed benami transactions.

The punishment

In case a person is proved guilty, he will be subject to a rigorous imprisonment (RI) of one to seven years, while he might also have to pay as much as 25 per cent of the market value of the property as fine. An offender could even be subjected to both. On the other hand, there is a provision of an RI of 6 months to seven years for providing false information. Such offenders will be liable to pay 10 per cent of the market value of the property as fine.

The authority

Under the new law, there will be four authorities to probe cases regarding benami transactions. These would include an initiating officer, an approving authority, an administrator and an adjudicating authority. the cases related to benami transactions will be handled by an appellate tribunal. To challenge an order passed by an appellate tribunal, one will have to approach the high court. Some sessions courts will also be appointed to act as special courts to try cases pertaining to benami transactions.

How does the Benami law impact real estate?

For people with unaccounted money, immovable assets are the most popular means to park such money. This is the reason why a great number of benami transactions take place in India every year. With the revenue loss that they cause to the government, such transactions impact the country's economy adversely. On the other hand, they also bring a bad name to the sector. The new law will go a long way in cleaning up India's real estate sector.\

Also Read: Govt Goes After Benami Properties, Unearths 400 Transactions