Benami Transactions Amendment Act, 2016





Earlier the benami transactions are defined as a “transaction where a
property is held by or transferred to a person, but has been provided for
or paid by another person”. This Act has amended this definition by to add
other transactions which qualify as *benami*, such as property transactions
or arrangement where:



A. i. where a property is transferred to, or is held by, a person, and the
consideration for such property has been provided, or paid by, another
person



ii. the property is held for the immediate or future benefit, direct or
indirect, of the person who has provided the consideration



B. the transaction is made in a fictitious name,



C. the owner is not aware of denies knowledge of the ownership of the
property, or



D. the person providing the consideration for the property is not traceable.



The Bill also specifies certain cases which will be exempt from the
definition of a *benami*transaction. These include cases *when a property
is held by:*



(*i*) a *Karta*, or a member of a Hindu undivided family, as the case may
be, and the property is held for his benefit or benefit of other members in
the family and the consideration for such property has been provided or
paid out of the known sources of the Hindu undivided family;



(*ii*) a person standing in a fiduciary capacity for the benefit of another
person towards whom he stands in such capacity and includes a trustee,
executor, partner, director of a company, a depository or a participant as
an agent of a depository under the Depositories Act, 1996 and any other
person as may be notified by the Central Government for this purpose;



(*iii*) any person being an individual in the name of his spouse or in the
name of any child of such individual and the consideration for such
property has been provided or paid out of the known sources of the
individual



(iv) any person in the name of his brother or sister or lineal ascendant or
descendant, where the names of brother or sister or lineal ascendant or
descendant and the individual appear as joint-owners in any document, and
the consideration for such property has been provided or paid out of the
known sources of the individual



This new law has also increased the penal provisions for ,



1. whoever is found guilty of the offence of *benami* transaction shall be
punishable with rigorous imprisonment for a term which shall not be less
than one year, but which may extend to seven years and shall also be liable
to fine which may extend to 25 per cent of the fair market value of the
property.



2. whoever is guilty in providing false information as required to furnish
shall be punishable with  rigorous imprisonment of six months up to five
years, and a fine which may extend to 10% of the fair market value of the
*benami* property



*Impact on Real Estate*



This act would be applicable on any kind of assets movable, immovable,
tangible, intangible, corporeal or incorporeal. It also includes any right
or interest or legal documents or instruments evidencing title to or
interest in the property; where the property is capable of conversion into
some other form, then the property in the converted form; and the proceeds
from the property. The act is expected to adversely impact transaction
volumes and lower property prices. The act will ensure that all real estate
transactions shall be in the name of actual owne*r*. i.e. actual person
paying the consideration from her/his known sources. One of the major
problem in real estate transactions is clarity of title which limits
investor as well as financial Institution participation in the sector.
Transparency issue is one of the negative factor which limits the private
equity and NBFCs.



*Conclusion*



The amendment in the act is a means to reduce generation and utilization of
unaccounted (black) money. This was a pivotal election promise made by the
current government. Through this amendment the government seeks to clearly
define ‘*Benami*‘ transactions, establish adjudicating authorities and an
Appellate Tribunal to deal with Benami transactions, and specifies the
penalty for entering into *Benami* transactions. Moreover, this will also
increase the tax revenue for the Government by curbing unaccounted money
into the system.



In the short term it will lead to a reduction in transaction volumes.
However, in the long term it will make India a more attractive investment
destination, aligning transactions with ethical standards and will increase
international institutional investors and financial institutions
participation in this sector.

*Courtesy: Lawyers Club *

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