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Arjuna (Fictional Character): Krishna, the Modi government has brought in hard provisions for the persons having benami property and for tax evaders. There was a reward in the movie, Sholey for catching Gabbar Singh, so now, will the government be able to catch the benamidar and confiscate the benami property? And how will it be possible?

Krishna (Fictional Character): Arjuna, to prevent generation of black money and to punish the Income tax evaders in India, some positive changes were made in the last year in the Benami Property Transaction Act 1988 and the new law called the "Prohibition of benami property transaction act 1988" was implemented from 1st November 2016. In this, details about confiscation of benami property, penalty and fine are given. Many persons secretly enter into a transaction of purchasing benami property and they do not pay the taxes on it. These people will face problems. The benamidar has actually become like the character, Gabbar. It is the duty of the government to catch the persons who do not pay taxes even though they have wealth. It has become necessary for the government to bring more strictness in applying the law. The government will catch Gabbar Singh with the help of information collected in the form of adhar number, PAN, bank account number, mobile number etc. The provisions of this law will be useful to curb the black money.

Arjuna: Krishna, what is "Benami Transaction""?

Krishna: Arjuna, Benami transaction is a transaction or arrangement whereby the identity of the real owner of property is concealed by showing someone else as the owner on record. The real owner (beneficial owner) pays consideration but the property is in the name of other person (benamidar). Benami transaction can be done by any person. Beneficial owner or Benamidar may be an individual, HUF, firm, company, trust etc.

Arjuna: Krishna, who is a benamidar?

Krishna: Arjuna, It means a person in whose name benami property is purchased or held. It means that the money actually belongs to one person and property is purchased on the name of another, whether alive or not. The benamidar person or entity can be existing or non-existing. Only the name of the benamidar person is used but the possession is not with him.

Arjuna: Krishna, who is beneficial owner?

Krishna:  Arjuna, beneficial owner is the person in whose money is used in the property and is taking the benefit of it. It is immaterial whether the identity of the beneficial owner is revealed or not.

Arjuna: Krishna what are the categories of benami transactions?

Krishna: Arjuna, Benami transaction may be following four types:

1.  Transaction or arrangement where the consideration is paid by any person other than the person in whose name property is held. Example- The property is held on the name of "Sambha" but consideration for the same is paid by "Gabbar".

2. Where transaction or arrangement is carried or made in a fictitious name. Example- The transaction is made in the name of "Kaliya" but person whose name is "Kaliya" is not in existence.

3. Where benamidar is not aware of or denies knowledge of transaction or arrangement. Example- "Gabbar" has deposited 10 Lakhs in the Jan Dhan account of "Surma Bhopali". But "Surma Bhopali" does not know who" Gabbar" is.

4. Where the beneficial owner who paid consideration is fictitious or is untraceable. Example- "Gabbar" has paid consideration for property but the person whose name is "Gabbar" is not in existence or cannot be traced.

Arjuna:  Krishna, what is Benami property?

Krishna: Arjuna, Any transaction of property whose nature can be classified in any one of the above mentioned categories is benami property. It can be in any form i.e. Immovable property (Land, House etc), Movable property (cash, jewellery, bank deposits etc), Intangible property (trademark, goodwill etc), Foreign properties can also be benami property.

Arjuna:  Krishna, what will happen if benami transactions are carried out?

Krishna: Arjuna, if a person enters into a benami transaction before 1st of November 2016 then the person is punishable with imprisonment up to 3 years and/or fine.  But if benami property transaction is carried out after 1st of November 2016 then the beneficial owner, benamidar or any other person connected to the transaction can be punishable with imprisonment for 1 to 7 years and also be liable to pay fine which may extend upto 25% of the fair market value of the property. The same benami property will be confiscated by central government. The benficial owner or benamidar loses their all rights to sell or purchase the benami property. The same rights cannot be enforced by any suit, claim or action. Many more issues are there in law to curtail such benami transactions.

Arjuna: Krishna, what is to be done to get out of this situation?

Krishna: Arjuna, to get out of this situation, the person can declare his amount of cash, bank deposit in Pradhan Mantri Garib Yojna . The person cannot declare his gold, silver, land, etc. in this scheme. For this 49.9% is to be paid consisting of tax, cess and penalty. 25% of amount declared will be required to be kept as deposit under Pradhan Mantri Garib Yojna for the period of 4 years. This Yojna is available till 31st of March 2017.

Arjuna: Krishna, What should taxpayers learn from this?

Krishna: Arjuna, this is a danger sign for the persons who have adjusted their cash by depositing money in other people’s account during the demonetization period. Not only will the Government cease the benami property, it will also lead to a punishable offence. Appropriate action will be taken against persons like Gabbar Singh who do not pay taxes. All taxpayers should carefully pay taxes so as to not find themselves in the shoes of Gabbar Singh or else Income tax officers like Jai & Veeru will penalize all the Gabbars who evade taxes, under benami transaction law.


Published by

CA Umesh Sharma
Category Income Tax   Report

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