Government to target Benami property: What does it mean?

The government has been taking a serious stance in its fight against the black money. After demonetisation, the next target as also repeatedly emphasised by the Prime Minister is the Benami property.

Here is all you need to know about the Benami Property.

  • What is a Benami property?:
    • A property which is purchased in the name of someone who has not purchased it.
    • The person on whose name it is purchased is called benamdar.
    • The property purchased is  a Benami property.
    • Such a property may be movable or immovable, tangible or intangible, any right or interest or legal documents, even gold or financial securities.

Image result for benami property

  • Why is it necessary to tackle the Benami property holding?:
    • It is one of the largest sources to channelize the black money.
    • Illegal money is often used to purchase land or any property.
  • What is/are the reason/s for existence of Benami property?:
    • Evasion of Land ceiling acts(an upper limit on land holdings is placed to avoid concentration of land with a few).
    • To evade taxes and conceal the accrued black income.
    • To conceal the corruption-related income (by the public servants).
  • Any earlier attempts/recommendations to curb Benami property?:
    • Committee on Tax reform : 1960.
    • Law Commission: 1973.
    • Benami Transactions(Prohibition) Act, 1988: First of its kind legislation.
  • What’s there in the new legislation?
    •  Definition:
      • Earlier definition: a property transferred in the name of a person but paid by another person.
      • NOW: following will be considered as benami:
        • Transaction made on fictitious name.
        • Owner is not aware or denies knowledge of the ownership of the property.
        • The person providing the consideration of the propertyànot traceable.
      • Exemptions under the new act: cases when a property is held by:
        • A member of HUF in the name of child/spouse and paid through known sources.
        • Joint property with sister, brother or other relatives for which the amount is paid through known sources.
        • Someone in fiduciary capacityàtransaction involving a trustee and a beneficiary company , firms and bodies of individuals director, trustees, directors of a company.
        • Religious trusts.
      • Imprisonment and fine :
        • 7 years+ fine(can be up to 25% of the fair market value of the property) as compared to the previous 3 year jail or fine or both.
        • Also penalties for providing false info 6 months to 5 years + fine up to 10% of fair value of Benami property.
      • Earlier  authority according to rules; Now: Four authorities:
        • Initiating officer.
        • Approving authority
        • Administrator.
        • Adjudicating authority.
  • What are the challenges that lie ahead?:
    • Identification of Benami Property.
    • Lack of political will.
    • Lack of proper implementation. The earlier act of 1988 was barely implemented.
    • Procedural infirmities.

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