Key Highlights of Benami Transactions (Prohibition) Amendment Act, 2016 – A Brief Introduction


Key Highlights of Benami Transactions (Prohibition) Amendment Act, 2016 – A Brief Introduction

The Income Tax department has notified that the Benami Transactions (Prohibition) Amendment Act, 2016 (BTP Amendment Act), will come into force from 1st November 2016. The new law seeks to give more teeth to the authorities to curb benami transactions.

The official notification says, ‘The PBPT Act prohibits recovery of the property held benami from benamidar by the real owner. Properties held benami are liable for confiscation by the government without payment of compensation.’

Now, under the amended law, all those benamdars and the real owners, who have been indulging in bogus transactions since the period the original Benami Act was formulated, will find that there is no escape route if they are identified, for not only will they will have to forego property but their property will also be impounded by the government and, moreover, they will be liable to face imprisonment or penalty as the case may be.

Key Points of Benami Transactions (Prohibition) Amendment Act, 2016


1. What does word Benami means?

Benami word is originated from Persia which means “No Name” or “Without Name”. In this benami transaction bill, the word benami is used to point out the transaction in which the owner of the property is not the actual/real beneficiary of the property.

2. What is Benami Transaction?
Benami Transaction means the transaction in which the person who pays for the property does not hold/own the property and the person who hold/own the property is not the one who pays for it.

In simple words the amount is paid by one person and the property is held by another person for direct or indirect benefit to the payer.

3. What will not be considered as Benami Transactions?
Following transactions are not considered as Benami Transactions and are excluded from the scope of the Benami Transaction (Prohibition) Bill, 2015:

  1.   Property held in the name of the children or spouse through know income sources;
    2.    Property jointly held with brother, sister or lineal ascendant or descendant for             which the amount is paid out of known sources of income;
    3.   HUF buying property in the name of the Karta;
   4.   Property held by someone in fiduciary capacity such as a trustee, executor, partner     or director of a company.

4. What is the nature of transactions which will be considered as a benami transaction?

Benami Transactions includes:
    1.   Transactions which are carried out in bogus names; or
    2.   Where the person who owns the property denies knowledge of the ownership; or
    3.  Where the person who paid consideration for the property i.e. real beneficiary is         not traceable or fictitious.

Further, Benami Transactions shall include assets (movable or immovable, tangible or intangible), any right or interest, legal documents, even gold or financial securities could qualify to be Benami.

5. Will Benami Property be confiscated?

The 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.

6. What is the proposed fine or punishment under the Benami Transaction Bill?

The person found guilty may have to face rigorous imprisonment for a period not less than one year and which may be extended to maximum of seven years.
In addition to imprisonment, there would be a penalty of 25 percent which will be calculated on the fair market value of the property.

Further, any person who is asked to furnish any information under this act, if intentionally provides false information shall face rigorous imprisonment of not less than six months which may extend up to five years along with the fine of 10 percent of the market value of the property.

7. How will the market value be ascertained?
Market value of the concerned property would be taken as the value that property would fetch on sale in open markets or in any other case, help of the registered valuer will be taken.

Summary of Key Provisions of Benami Transactions (Prohibition) Amendment Act, 2016

1.  Persons indulging in benami transactions may face up to 7 years’ imprisonment and fine.
2.    Furnishing false information is punishable by imprisonment up to 5 years and fine Properties held benami are liable for confiscation by government without compensation
3.   Initiating Officer may pass an order to continue holding property and may then refer case to Adjudicating Authority which will then examine evidence and pass an order.
4.  Appellate Tribunal will hear appeals against orders of Adjudicating Authority.
5.         High Court can hear appeals against orders of Appellate Tribunal.
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