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What is The Meaning of Benami Property and Transaction
Benami is a Hindi word which is defined as 'having no name'. A benami property is a property purchased by an individual not under his/her name. The transaction involving a property defined as benami is termed benami transaction.
Who is benamdar and what are the benami transactions?:-
In India, benami transactions are common and the usual reason behind them is to convert black money to white money. The individual on whose name the Commercial property is acquired is termed benamdar. The benami transactions cover acquiring assets of all types- movable, immovable, tangible, intangible, legal documents and any right or interest. The benami Commercial property and transaction are simply useful for person who paying amount in order to buy real estate commercial space.
The Benami Property Transactions Act dates back to 1988. The act was recently amended by the central government. The Benami Transactions(Prohibition) Amendment Act, 2016 is presently in force since November 1,2016.
As per the amended Act a benami transaction is a transaction where a certain property is held by or transferred to an individual but another individual has provided for or funded it. Certain property transactions are defined as benami. They are as follows
- A fictitious name is used in the transaction.
- The owner is unaware of his/her ownership of the property.
- The individual who has funded the transaction is untraceable.
- If in a Hindu Undivided Family(HUF), Karta or any other member of the former owns any property for his/her benefit or for the benefit of the members of the family. The property needs to be acquired from the declared sources of income.
- If the commercial space is held by an individual on behalf of another individual in a fiduciary capacity. Examples are director of a company, trustee, partner of a firm among others.
- An individual has bought a property using declared source of income in the name of siblings or lineal ascendant or descendant. The former needs to be a joint owner. The lineal ascendants include father, mother, grandfather and grandmother. The lineal descendants include children and grandchildren.
Earlier the penalty for doing benami transaction was imprisonment up to 3 years, or a fine, or both. Now the penalty is rigorous imprisonment ranging from 1 year to 7 years. There will also be a fine imposed equivalent to up to 25% of the fair market value of the benami commercial projects.
The penalty for giving false information is rigorous imprisonment ranging from 6 months to 5 years. There is also a fine going up to 10% of the fair market value of the benami property.
On the whole, the Indian real estate experts opine that implementation of RERA is good news for all the involved stakeholders in commercial real estate.
As many tax evaders use their black money to acquire benami properties they escape paying their due tax to the government. This adversely affects revenue collection by the government which could have been invested in the growth and development of the country. Money acquired by corruption is also widely employed to invest in benami commercial project. This way corrupt people escape punishment.