Tag: What is Benami Transactions (Prohibition) Amendment Act

One of the leading issue in Indian economy is the effort made by the government to tackle the problem of black money and related illegal economic activities. Several efforts were made by the government to fight black money, money laundering etc. One such serious and sound step is enactment of the Benami Transactions (Prohibition) Amendment Act 2016. The Act amends the existing Benami Transactions (Prohibition) Act, 1988, and came into effect on November 1, 2016. The modified new legislation will be known as Prohibition of Benami Property Transactions Act, 1988 (PBPT Act). The Act is going to be an ace weapon to track and trap blakc money supplementing the Income Declaration Scheme 2016 and the demonetisation programme launched by the government. Already, the tax department has taken measures against two big recent disclosures (Rs 2 lakh crore and Rs 13000 crore) on the ground of benami property. This is using the New Act. Compared to the previous legislation, the modified Act is more clear and stern in terms of its treatment of Benami Property Transactions. According to the Central Board of Direct Taxes notification that made the announcement of the revised Act, “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 Act provides for imprisonment of upto seven years, confiscation of the property and non-return of the property from the benamidar to the real owner. There is no compensation by the government if the property is confiscated. The Act is tries to sort out the weaknesses of the existing provisions and is remarkable in terms of the following features: (i) it amends the definition of benami transactions, (ii) it establishes adjudicating authorities and an Appellate Tribunal to deal with benami transactions, and (iii) it specifies the penalty for entering into benami transactions. What is Benami transaction? The amendment broadens benami transaction by adding few more areas. The existing Act defines a benami transaction as a transaction where a property is held by or transferred to a person, but has been provided for or paid by another person. The Act amends this definition to add other transactions such as property transactions where: (i) the transaction is made in a fictitious name, (ii) the owner is not aware of denies knowledge of the ownership of the property, or (iii) the person providing the consideration for the property is not traceable. Property transactions among family members is not benami transaction. Here, the Act clearly sets the limit of relationship. Only lineal ascendants (father, mother, grandparents and great grandparents) and lineal descendants (children, grandchildren and greatgrandchildren) are considered as family members. Creation of institutional framework for the implementation of the law. The main weakness of the existing Act was that there was lack of an institutional machinery to carryout ani-Benami transaction procedures. Here, the amendment creates the required institutional arrangements for implementation of the law. Under the Act, an Authority to acquire benami properties was to be established by the Rules. The Bill seeks to establish four authorities to conduct inquiries or investigations regarding benami transactions: (i) Initiating Officer, (ii) Approving Authority, (iii) Administrator and (iv) Adjudicating Authority. The Act gives the Initiating Officer the power to enquire into any person, place, documents or property in the course of investigation into any matter related to a benami property transaction. Interestingly, the Act covers all domestic benami property transactions conducted since 1988. What is Benami Property? Simply, benami property is the one whose legal owner is different from the actual owner. The amended Act gives a comprehensive definition of benami property. As per the amendment, Benami property includes: immovable assets such as land, flat or house, movable assets such as gold, stocks, mutual fund holdings, bank deposits etc. If the property is sold, then the proceeds from the sale is also included under benami property. According to the Act, people caught with 'benami' properties could serve up to seven years of rigorous imprisonment and have to pay a significant fine. False information face about benami transaction will end up in rigorous imprisonment for up to five years and will have to pay a fine of up to 10 per cent of the market value of the property. **********

Tag: What is Benami Transactions (Prohibition) Amendment Act

What is Benami Transactions (Prohibition) Amendment Act, 2016?

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