There was an article published in ET on Govt to strengthen Benami Transactions Prohibition Act. The article instigated me to study how the current law will be made stronger.
What is Benami Transaction?
Any transaction in which property is transferred to one person for a consideration paid or provided by another person. These transactions can be in good spirit or to evade taxes. In good spirit, when husband buys a property for his wife and in bad spirit, a financer buying property in the name of his relative or friend to withheld the real income or source of income.
Current provisions of law
Benami Transactions Prohibitions Act of 1988 states the following transactions within the premises of this law:
- Any transaction in which property is transferred to one person for a consideration paid or provided by another person.
- Property can be movable or immovable, tangible or intangible and includes any right or interest in such property.
- Transfer of property in the name of wife and unmarried daughter for the benefit of wife and daughter is excluded from the provisions.
- Transfer in the name of coparcener for the benefit of other coparceners for HUF and transfer to trustee for the benefit of trustor are excluded from the provisions.
Punishments if the law is violated
- Benamidar is not allowed to file a suit or claim for the property named on another person.
- Whoever enters into any benami transaction shall be punishable with imprisonment which may extend for 3 years or fine or both.
Limitations of the law
- It is difficult to prove that a transaction is benami because financial paper trails do not exist. In such situations, prosecutor needs to prove that a transaction is benami.
- The law said that Central Government may make rules for carrying out the purposes of this act and the rules to operationalize the law could not be framed.
How is the law being made stronger?
- A confiscating authority will be set up as per the provisions of the Act. The authority will be empowered to deem (or, hold) a property benami and confiscate it if the owner does not have a proven source of earning.
- Power of the confiscating authority and the rules would now be the part of the law itself.
Let us see how far Benami Transactions Prohibition Act goes in curbing the rampant black money in real estate.