What is Benami Property and what does the law say about it?
What is Benami Property?
The property which is held by a person in the name of other person but the price has been paid by someone else or somebody uses his/her name to allow someone to buy any house, land or any other property. Moreover, making fixed deposits in bank accounts by other names is also considered a Benami property.
Who is known as Benamdar?
The person on whose name the property has been purchased is called‘Benamdar’. The Benami property includes buying movable, immovable, tangible assets or legal documents. Some people invest their black money in this property which is not on their name but on someone else's name. Such people buy the property in the name of their wives, children, friends, servants or any other acquaintance.
In simple words, the person who purchases Benami property does not keep legal records with his name but holds a proprietary right over the property.
Why the Benami Property got developed?
As a matter of fact, some people accumulates black money from bribes or other means, but they get petrified of the fact that if they purchase any property in their own name then the income tax department may ask them from where did they get the huge amount of money. Consequently, in order to save tax individuals purchase Benami Property. The black money have been used in all Benami Properties.
What will not be entitled Benami Property?
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If someone held the property under the name of his/her brother, sister or other relatives, spouse or child,and for which the amount is being paid through a known source of income, i.e. the amount has been mentioned in the income tax return then it will not be considered as Benami Property. Furthermore,the proprietary right over the property for which the amount is paid out of known sources of income will not be counted as Benami Property. But if the government is suspicious then it can question the owner of the property and demand all official papers sending the short notice which the owner has to present in the duration of 90 days.
What is Benami Property law?
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To get rid of the problem of rising black money in India, the government had imposed a ban on notes on November 2016; In this direction, the government has made changes in the Benami Transaction (Prohibition) Amendment Act, 1988 and amended it in 2016 and the amended law came into effect from 01 November 2016. The right to seize and seal the benami properties in the revised bill. The Parliament passed the Benami Deal Prohibition Act in August 2016; After it came into effect, the existing Benami Deed (Prohibition) Act, 1988 has been renamed as Benami Property Transaction Act, 1988.
What does the new law say?
The definition of Benami property transaction is modified in the new law. In the new law, those who purchase Benami property will be punished by the Appellate Tribunal and related agency. After the modification in the law, a property bought by the fraud name will also be considered as the Benami Property. If in any case the proxy owner of the property also doesn’t know the name of the real owner then such property will also be assumed as Benami Property.
For example, If Mr. A and Mr. B are friends and A requests to Mr. B that one of his close friend that is Mr. C want to purchase a property in the name of B; and B allows Mr. C to use his name in purchasing a property then such property will be termed as the Benami Property.
How much punishment is applicable?
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Under this new law, the Benami trader can be sentenced to 3 to 7 years of jail and a penalty of 25% on the market value of that Benami Property. If a Benamdar has given wrong information about the asset then he can be fined up to 10% of the market value of the property and jail term from 6 months to 5 years. Apart from these, if one could not prove that the property belongs to him/her then the property can be seized by the government.
How will black money come out?
As per the new provision, property will be linked to the Aadhar Card and PAN card. Now the owner of the property will be served notice to link the property with his Aadhar card and PAN number. If someone has allowed some else to use his name to purchase a property; will also be served notice for linking the property. In this way, when the fake owner will file the income tax return he will be caught by the income tax department because the income tax department will ask the fake owner about his source of income.