The meaning of Benami is 'no name' or 'without a name.' A Benami property is one in which a person uses a fake identity instead of his/her original identity while purchasing a property or doing any transaction.
Due to the surge in these kinds of cases, the Indian government passed the Benami Transactions (Prohibition) Act in 1988 with the goal of preventing Benami transactions. The Benami Transactions (Prohibition) Act, 1988, made Benami transactions illegal in India for the first time. The restriction on Benami transactions was enacted to dissuade people from using unethical motives, including money laundering, tax fraud, and so on.
If a property's title is transferred under a fake name and possession is held by someone who retains the property willfully for the direct or indirect advantage of the beneficial owner, that person should be held accountable as well.
No one may participate in a Benami transaction or acquire property in the name of his wife or unmarried daughter. If he does so, it will be assumed, unless proven otherwise, that the stated property was acquired for the benefit of the unmarried daughter or wife.
Anyone who engages in a Benami transaction is penalized by imprisonment for a term of up to three years, or a fine, or both.
If a person is holding any Benami property, they can’t re-transfer it. Any re-transfer made in this manner will be null and invalid. This rule, however, does not apply if the re-transfer is conducted in line with the Income Declaration Scheme, 2016 and section 190 of the Finance Act, 2016.
Let's look at the meaning of the Benami property to understand it better.
If a person purchases any property with a fake identity, that is known as a Benami property. The property can be movable, immovable, tangible or intangible. Benami property also includes a shared property with a brother, sister, or other relatives. Additionally, the monetary value of the property falls under this section.
The Benami Transactions (Prohibitions) Act of 1988, which had nine provisions, was the first law dealing with Benami transactions. The act, however, was unproductive and had no impact on Benami properties or transactions. Therefore, a new Benami law was enacted with 72 provisions in 2016 to ensure its effectiveness. This act imposes stricter regulations and hefty penalties.
Despite the fact that such immoral stances are subject to severe laws and limitations, certain people continue to register a Benami property and evade the taxation connected with acquiring a property. Therefore, the government launched the Benami Transactions Informants Reward Scheme in 2018 to deter unlawful real estate transactions. According to this initiative, those who report a Benami property can receive up to Rs. 1 Crore in reward.
A transaction in which property is transferred to or retained by one person but the compensation is paid by another person is known as a Benami transaction. Also, when any property transaction is carried out under a fictitious identity, that is classified as a Benami transaction. Benami transactions include the purchase of any asset, whether movable or immovable, tangible or intangible, any right or interest, or official papers.
Let’s understand this with an example:
A person purchases a house and gets it registered in his name and the second person pays for it. The first person agrees to keep the property only for the second person. As a result, the second person is the property's beneficial owner.
Below are the exceptions for Benami transactions.
A person of the HUF holds property for the benefit of the HUF, and the compensation is paid from the HUF's recognised income sources.
An individual who holds property in a similar position to another person, such as a trustee of a foundation, a director for his organization, and so on.
A person who owns possession of his spouse or kid and pays the compensation from his or her own respected sources.
A person who owns property simultaneously with his/her siblings and receives payment from such individual's recognised sources.
While the 1988 Act merely stigmatized the transfer of title to a property, the 2016 Act deemed illegal both the transfer of title and ownership of Benami property.
Apart from this, the following is a list of the penalties that will be imposed on a person if he or she violates the law.
A fine of up to 25% of the property's value may be imposed (fair market value).
Jail imprisonment between 1 to 7 years.
When a person submits false information under this Act, they are subject to a fine of up to 10% of the property's worth (fair market value) and an imprisonment of 6 months to 5 years.
Being connected to a transaction involving a Benami property is a criminal offence by itself, hence you should never partake in it. It is always better to follow the law and do things the right way. Failure to do so could invite serious legal consequences. One such way in which you can avoid these consequences by purchasing a property in your name through a home loan taken by you in your name. At Bajaj Markets, you can avail a housing loan at affordable interest rates.
The Indian government enacted the Benami Property Act with the goal of preventing Benami transactions. Benami transactions mean using a fake identity while purchasing a property.
Earlier, the Benami Act had nine provisions. But to increase its effectiveness, a new Benami Property Act 2016 was enacted with 72 provisions.
You can file a complaint by visiting the official website of the Income Tax Department.
A Benami property is one that is purchased under a false name. It might be moveable, immovable, tangible, or intangible property. Shared property with a brother, sister, or other family is also considered a Benami property. The monetary worth of the property is also included in this section.
No, as per the law, you can’t transfer the property. Any such transaction is considered invalid. This rule, however, does not apply if the re-transfer is conducted in line with the Income Declaration Scheme, 2016 and section 190 of the Finance Act, 2016.