Prime Minister Narendra Modi has trained his guns on Benami’s by making benami act more strongly. Everyone needs to know the new Benami Act 101 Article (PBPT Act).
Benami Transactions (Prohibition) Act, 1988:
In 1988 Indian parliament has made an Act to prohibit certain financial transactions, Under Benami Benami Transactions (Prohibition) Act 1988. This act defines a ‘benami’ transaction as any transaction in which property is transferred to one person for a consideration paid by another person.
The new Benami Act renamed as PBPT Act 2016 (Prohibition of Benami Property Transactions Act, 2016). Under India’s Benami Act, owning properties or assets under a different or others name (apart) is a crime.
What is Benami Act (Benami Meaning):
‘Benami’ is a Hindi word meaning “without name” or “nameless”. This Act uses the word ‘benami’ to define a transaction in which the actual beneficiary is not the one in whose name the property is purchased – benamidar.
The actual beneficiary is the person financing the deal. In most such deals, who usually keeps the property papers and also retains the power of attorney to sell the asset.
In his ‘Mann Ki Baat’ address to the nation on radio, PM Modi perform his pledge to remove black money from the system, a drive that eradicates benami property, and end conversion of undeclared cash, or black money, into gold.
Referring to the old version of the Benami Act PM Modi Said “I assure you that this is not the end”, this Old Benami Act could not be implemented for nearly 30years because the rules having with loopholes.
Note: This is just the beginning of our fight against corruption…. In the coming days, this law will also become operational.
The Benami Act as PBPT Act 2016:
CBDT (The Central Board for Direct Taxes) notified that the new Benami Act would come into effect from November 1, 2016, and also it has been renamed as PBPT Act 2016 (Prohibition of Benami Property Transactions Act, 2016). Visit for more details.
The old Bill that was made fairer or more accurate and transparent, lacking quality or quantity with just nine sections, had been passed by Parliament(1988). In 2014 Modi government came to power, Finance Minister Arun Jaitley has introduced the amended bill with 71 sections in the LokSabha. This new Benami Act will block escape routes for all benami transactions since 1988.
“This PBPT Act finds benami transactions, prohibits them and further provides that violation of the PBPT Act is punishable with imprisonment and fine,”
“The PBPT Act prohibits recovery of the property held benami from benamidar by the real owner. Properties held benami are liable for seizing by the Government without payment of compensation.”
New Benami Act (PBPT Act) Objective:
already Parliament cleared 2 Bills to zero-in on that parking undeclared money abroad. These are the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act.
The PBPT Act is targeting black money in the Indian (Domestic) market, and identify people entered into benami transactions to escape tax or to avoid payment to creditors.
new Act is also expected to check benami purchase of land or agricultural land and black money in real estate sector. Various departments have begun checking government lands to identify benami Purchase.
The amended Benami Act has 3 primary objectives:
- a) As already stated, the primary aim was to plug lacunae in the 1988 rules by clearly defining what constituted benami transactions;
- b) Second, the aim was to establish the relevant adjudicating authorities, and
- c) Finally, it sought to set up an appellate tribunal to deal with benami transactions, appeals and specifying the penalty for transgressions.
The process of conducting inquiries regarding benami transactions will have four layers, these being:
- The Initiating officer.
- The Approving authority.
- The Administrator, and
- The Adjudicating authority.
What is Benami (Definition of Benami)?
Assets of any kind — movable, immovable, tangible, intangible, any right or interest, or legal documents. And even gold or financial securities – could qualify to be benami.
In Earlier a transaction was considered benami where the property was held by or transferred to one person but was provided for or paid by another individual.
The amended Benami Act definition has now been expanded to cover transactions where:
- (a) Deals are in a fictitious name.
- (b) The owner is unaware of or denies knowledge of the ownership, (or)
- (c) The person providing the consideration of the property is not traceable.
How amended Benami Act will work:
Suspected person (benamidar) will be served a notice on the source of funds by an Officer. If the answer is not satisfactory, action will be initiated under PBPT Act, 2016.
The Officer may hold the property for 90 days from the date of issue of notice if the Approving Authority permits it. At the end of the notice period, the Initiating Officer may pass an order to continue holding the property, till the matter is disposed of.
Related: Niti Aayog Adding More Innovation Labs in 2017.
There are Some Exemptions:
Genuine religious trusts are to be kept out of the purview of the new legislation. But honest, tax-paying people also buy properties in the names of their spouse or offspring or even parents – as a cushion for them during unforeseen crises. Will such transactions be deemed benami?
Actually, no, not if the amount paid is from a declared source of income – certain cases will be exempt from the definition of a benami transaction. These include cases when a property is held by:
- (a) A member of a Hindu undivided family. And is being held for his or another family member’s benefit. And has been provided for or paid off from known sources of income of that family.
- (b) A person in a fiduciary capacity – transaction involving a trustee and a beneficiary, and
- (c) A person in the name of his spouse or child, and the property has been paid for from the person’s known income. (or).
- (d) Jointly with siblings or other relatives, or by someone in a fiduciary capacity.
- (e) There is nothing to worry about if the money source is accounted for.
Penalties in new Benami Act:
The new law seeks to replace the earlier penalties with more stringent punitive measures.
For instance, property involved in benami transaction could be confiscated as soon as the order of initiation of proceedings against the benami transaction is authorized by the competent authority. No compensation will be paid.
The person found guilty may have to face rigorous imprisonment for a period not less than one year, which may be extended to seven years.
In addition, there could also be a penalty of 25%, which will be calculated on the fair market value of the property.
Further, any person found guilty of intentionally misleading investigators when asked to provide information under the Act? can be handed down rigorous imprisonment of not less than six months. This may extend up to five years along with the fine of 10 percent of the market value of the property.
Under the new law, the Appellate Tribunal will hear appeals against orders passed by the Adjudicating Authority. Appeals against Tribunal orders, in turn, will be heard by the High Court.
The Last Word:
According to Anuj Puri, chairman and country head of real estate service provider JLL India. The success of the amended Act will lie in its quick and strict implementation.
“Else, the mystery of true ownership will remain unsolved,” he says in a signed article.