The demonetisation effort being led by PM Modi in India is that idea that Rs. 500 and Rs. 1,000 notes should be declared no longer legal tender, to be replaced by other notes of different designs and in one case, denominations. The aim is to wash the stock of “black money” out of the economy and get it into the licit, banked and taxable, part of the economy.
After Demonetisation Benami Properties is the Next Target of PM Narender Modi.
What is Benami?
Benami essentially means property without a name. In this kind of transaction the person who pays for the property does not buys it under his/her own name. The person on whose name the property has been purchased is called the benamdar and the property so purchased is called the benami property. The person who finances the deal is the real owner. '
The property is held for the benefit - direct or indirect - of the person paying the amount.
What is Benami Act?
First, a benami transaction is one where a property is held by one person and the amount for it is paid by another person. Therefore, in a benami transaction, the name of the person who paid the money is not mentioned. Directly or indirectly, the benami transaction is done to benefit the one who pays.
What isn’t a benami transaction?
1. Property held under the name of spouse or child, for which the amount is being paid through a known source of income.
2. A joint property with brother, sister or other relatives for which the amount is paid out of known sources of income.
3. Property held by someone in a fiduciary capacity; that is, transaction involving a trustee and a beneficiary.
How it affects the people?
It is being done to curb on black money. People with unaccounted income will sure have a tough time ahead. As for the general public, it won’t be much of an issue if their transactions are legal.
What falls under benami transaction?
Assets of any kind - movable, immovable, tangible, intangible, any right or interest, or legal documents. As such, even gold or financial securities could qualify to be benami.
New ‘benami’ Act to take effect from Nov. 1
The Income Tax department has notified that the Benami Transactions (Prohibition) Amendment Act, 2016 (BTP Amendment Act), will come into force from 1st November 2016. The new law seeks to give more teeth to the authorities to curb benami transactions.
The notification issued by the Income Tax department, stated that after coming into effect, the BTP Amendment Act, the existing Benami Transactions (Prohibition) Act, 1988, shall be renamed as Prohibition of Benami Property Transactions Act, 1988 (PBPT Act).
The Act defines benami transactions and also provides imprisonment upto seven years and fine for violation of the Act
The new law also provides for an appellate mechanism in the form of an adjudicating authority and appellate tribunal. For the purpose, the adjudicating authority referred to in section 6(1) and appellate tribunal referred to in section 25 of the Prevention of Money Laundering Act, 2002 (PMLA), have been assigned the task under PBPT Act as well. Under the Act, in each of the principal CCIT regions, a joint/additional commissioner of income-tax, an assistant / deputy commissioner ofincome-tax and a tax recovery official have been notified to perform the functions and exercise the powers of the approving authority, initiating official and administrator, respectively.
Highlights of the Benami Transaction Bill
The Bill seeks 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.
1) 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:
- the transaction is made in a fictitious name,
- the owner is not aware or denies knowledge of the ownership of the property, or
- the person providing the consideration for the property is not traceable.
2) The Bill also specifies certain cases will be exempt from the definition of a benami transaction.
These include cases when a property is held by:
(i) a member of a Hindu undivided family, 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;
(ii) a person in a fiduciary capacity;
(iii) a person in the name of his spouse or child, and the property has been paid for from the person’s income; and the Bill defines benamidar as the person in whose name the benami property is held or transferred, and a beneficial owner as the person for whose benefit the property is being held by the benamidar.
3) 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:
- Initiating Officer,
- Approving Authority,
- Administrator and
- Adjudicating Authority.
4) If an Initiating Officer believes that a person is a benamidar, he may issue a notice to that person. The Initiating Officer may hold the property for 90 days from the date of issue of the notice, subject to permission from the Approving Authority. At the end of the notice period, the Initiating Officer may pass an order to continue the holding of the property.
5) If an order is passed to continue holding the property, the Initiating Officer will refer the case to the Adjudicating Authority. The Adjudicating Authority will examine all documents and evidence relating to the matter and then pass an order on whether or not to hold the property as benami.
6) Based on an order to confiscate the benami property, the Administrator will receive and manage the property in a manner and subject to conditions as prescribed.
7) The Bill also seeks to establish an Appellate Tribunal to hear appeals against any orders passed by the Adjudicating Authority. Appeals against orders of the Appellate Tribunal will lie to the high court.
8) Under the Act, the penalty for entering into benami transactions is imprisonment up to three years, or a fine, or both. The Bill seeks to change this penalty to rigorous imprisonment of one year up to seven years, and a fine which may extend to 25% of the fair market value of the benami property.
9) The Bill also specifies the penalty for providing false information to be 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.
10) Certain sessions courts would be designated as Special Courts for trying any offences which are punishable under the Bill.
Tags :Income Tax