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What Are Benami Properties? [A brief Study]

Benami is a Hindi term which means "without a name". Benami Property can be in any form, i.e., immovable, movable. Intangible, tangible, corporeal, incorporeal, property in converted form and proceeds from the property, which has been the subject matter of a Benami transaction. This would also include the consideration received from such property. Benami property would also include the right or such other document evidencing title or interest in such property.

Any transaction in which property is transferred to one person for a consideration paid by another person is known as a Benami transaction under Benami Transactions (Prohibition) Act, 1988.

Laws against Benami properties

The first act against Benami properties was passed in 1988 as the Prohibition of Benami Property Transactions Act, 1988. To curb black money Benami Transactions (Prohibition) Amendment Act, 2016 came into force on November 1, 2016. The PBPT Act defines Benami transactions, prohibits them and further provides that violation of the PBPT Act is punishable with imprisonment and fine. The PBPT Act prohibits recovery of the property held benami from benamidar by the real owner. Properties held Benami are liable for confiscation by the Government without payment of compensation.

The amendment brought the following changes to the original act -

  1. Amended the definition of the Benami transactions to the present one.

  2. An appellate tribunal and an adjudicating authority to deal with the Benami transactions. The appeal against the order of tribunal will lie in the high court.

  3. Fixing the penalties for entering into Benami transactions. The original act provided imprisonment up to three years or a fine or both. It has now been changed to rigorous imprisonment of up to seven years or a penalty up to 25 percent of the fair market value of the property.

  4. The bill also specifies the exemptions from the definition of Benami transactions.

The bill also specifies some exceptions to the Benami transactions act. These include the cases when a property is held by -

  1. A member of a Hindu Undivided Family (HUF), and is being held for his or another family member’s benefit, and has been provided for or paid off from sources of income of that family.

  2. A person in a fiduciary capacity.

  3. A person in the name of his spouse or child and the property has been paid for from the person’s income.

Identification of Benami Properties

Prohibition of Benami Property Transactions Act 1988 as amended by the Benami Transaction (Prohibition) Amendment Act, 2016 seeks to prohibit the benami transactions irrespective of the method by which the benami property is acquired. Such benami transactions include transactions in respect of movable as well as immovable properties.

Till 31.05.2019, show cause notices under the Prohibition of Benami Property Transactions Act 1988 have been issued in over 2100 cases involving benami properties valued at over Rs. 9600 crores.

The Government has taken various steps to identify benami properties. The Income-tax Department (ITD) has set up 24 dedicated Benami Prohibition Units (BPUs) across India. These BPUs are involved in gathering information and matching the same with the data available for identifying the benami properties and taking effective action as per the provisions of Prohibition of Benami Property Transactions Act 1988.

Moreover, a new reward scheme titled “Benami Transactions Informants Reward Scheme, 2018” aimed at encouraging people to, inter alia, give information about benami transactions and properties has been introduced. Under the Benami Transactions Informants Reward Scheme, 2018, a person can get reward up to Rs. 1 crore for giving specific information in prescribed manner to the prescribed authorities about benami transactions and properties as well as proceeds from such properties, which are actionable under Benami Property Transactions Act, 1988. Identity of the persons giving information is not disclosed.

**This was stated by Union Minister of Finance & Corporate Affairs in a written reply to a question in Rajya Sabha.

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