Bengaluru, Nov 26: A week before Prime Minister Narendra Modi made the announcement that Rs 500 and 1,000 notes will no longer be legal tender, an act called the Benami Transactions (Prohibition) Amendment Act came into force. The act came into force from November 1 onwards, exactly seven days before the decision on demonetisation was made.
This act would have only a post-facto effect which means it would be after the benami transaction has taken place. The act being in force is said to be another step by the government to fight black money.
The standing committee which looked into this issue felt that there was a need to both eliminate such transactions and also pre-empt them.
The idea was to ensure that all property transactions were linked with the Aadhar and PAN numbers of all parties involved. Further it had also been suggested that the authorities registering the property intimate the Income Tax Department apart from digitising the land records.
What does the Act state?
The bill was introduced in the Lok Sabha on May 13, 2015 to amend the Benami Transactions Act of 1988. While the act provides for preventing and confiscating benami properties, the bill sought to amend the definition of benami transactions, (establish adjudicating authorities and an Appellate Tribunal to deal with benami transactions, and specify the penalty for entering into benami transactions.
The 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 Bill amends this definition to add other transactions which qualify as benami, 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.
What is a Benami property
Benami property is basically an asset which is purchased in another person's name. A person lends his or her name to the asset purchased by another person. It could be property, banks accounts of fixed deposits. Usually those persons who do not want to come under the scanner purchase properties in other people's names.
Benami transactions have been in force for over 200 years now. It became rampant during the abolition of the Zamindari system. Benami properties were used to dodge taxes and reduce personal liability.
What happens to benami property now?
According to the act, re-transfer of Benami property is now not allowed. However, the act also clarifies that those declaring Benami property under the Income Disclosure Scheme of 2016 will not be acted against. However, the central government can confiscate Benami property.
Anyone found entering into a Benami transaction can be imprisoned for a term ranging between one and seven years. A fine of up to 25 per cent of the fair market value can also be slapped.
Those providing false documents or information can be jailed for a term ranging between 6 months and 5 years. They can also be fined 10 per cent of the fair market value of the property.