'Benami' is a Hindi term that translates to 'no name'. A Benami property or Benami transaction is one where a person doesn't use his own name but the name of another person or a fictitious person. This is illegal and is a punishable offence under a court of law. Thus, in the past few years, our government is taking significant steps to end such dealings.
Navigate through this write-up to have an idea about the Benami Property Transactions Act. Also, find the punishment one can attract under the same.
The Benami Transactions Act prohibits Benami transactions. If carried, it allows the government to recover Benami property or a property with 'no name'. As per the Act, a Benami transaction is defined as a transaction where a person holds or transfers a certain property and another person pays for the consideration of such an asset, on the other party’s behalf.
The amendment to this Act came into effect on 1st November 2016. This amendment added a sub-section (2) in section 3 of part 3 of this Act. This mentions individuals entering into Benami transactions will be punished with imprisonment for up to 7 years or a fine or both. Additionally, the new punishment will also be applicable for transactions that took place before the year 2016.
Benami Transactions include those dealings where an individual holds on to a certain property for future benefits or immediate cause, directly or indirectly, of that person who has given the consideration.
Here is when a property becomes Benami:
Therefore, according to the law, the Central government can seize any property it labels as Benami property. However, it is essential to note that cash and any other sensitive information also becomes 'property' under the Benami act.
So, now that you have an idea about the Benami property act, here are some exceptions to keep in mind:
There are several instances of Benami Transactions, and some of them include the following:
The various types of punishment under the Benami Act are as follows:
If a person who needs to provide information under this Act gives false information, he/she will face either or both the punishments, such as:
Therefore, avoid any payment of statutory dues or payment of funds to creditors where a Benami transaction is entered to defeat the provisions of any law. Any person who enters or instigates another person to enter into such things will face the above circumstances under a court of law.
A person entering into an illegal investment under another person’s name comes with a lot of implications under the Prohibition of Benami Property Transactions Act. Besides, there are many implications under the Income Tax laws, both for the Benamidar and the beneficial owner.
The beneficial owner is the person who gives funds to purchase a particular property in another person’s name. Here are the tax implications as follows:
As per Section 69 of the Income Tax Act, if a person makes any investment that is not recorded in the book of accounts that he/she maintains, then the value of such investments made will be considered as the person's income. This will also fall under taxation in the year he/she made such investments.
The minimum tax rate that one has to pay for a particular income bracket is 30%. However, All Benami investments fall under taxation at a rate of approximately 60%. Apart from that, the person will also have to pay a surcharge of nearly 25% and an additional penalty of 6% on the total tax amount. Therefore, the total tax liability after considering all these taxes and surcharges will nearly come to 83.25% of the total value of the investments.
Since Benamidar is legally the property owner, they must pay a tax on the income generated from such a property. The legal owner will have to provide income on such properties even if there is no income generated from such properties.
Furthermore, a Benamidar will be liable for concealing such necessary facts before the Income-tax authorities and for providing wrong statements. This might lead to heavy fines and penalties under the Income Tax Act.
So, now you have all the details about the Benami Property Transactions Act. However, if you have such a property and are willing to transfer it, refrain from taking such a step. In that case, consult with a well-educated and experienced lawyer who will be able to provide an expert solution to you in this regard.
Please try one more time!
Disclaimer: This information is added only for informative purposes and collected from different sources across the Internet. Digit Insurance is not promoting or recommending anything here. Please verify the information before making any decisions.
Continue with {{bikeCtrl.lastVisitedData.lastVisitedUrl.indexOf('DigitPaymentGateway/payments')
!== -1 ? 'payment completion': 'previous choice'}}
{{healthCtrl.lastVisitedData.dropOffPolicyHolderData ? 'Complete your purchase': healthCtrl.lastVisitedData.lastVisitedUrl.indexOf('plans-page')
!== -1 ? 'Continue Browsing' : 'Continue with your previous choice'}}
