After demonetisation, Prime Minister Narendra Modi will crack the whip on benami property holders. This is major step to eradicate corruption and black money. The government feels that it is our responsibility to help the poor and I will do it,” Modi said in Goa. The New Benami Act came into effect from November 1. It prohibits illegal benami transactions, under which up to seven years of imprisonment and penalty for those indulging in such activities could be handed out. Benami is one of the most searched on Google with people enquiring about ‘How to convert black money into white money’.
What is Benami?
- Benami essentially means property without a name. In this kind of transaction, the person who pays for the property does not buy it under his/her own name.
- The person in whose name the property has been purchased is called the benamdar and the property so purchased is called the benami property.
- The person who finances the deal is the real owner. ‘
- The property is held for the benefit – direct or indirect – of the person paying the amount.
What constitutes Benami property?
Property that does not stick to the following criteria:
a) Property held in the name of spouse or child for which the amount is paid out of known sources of income
b) A joint property with brother, sister or other relatives for which the amount is paid out of known sources of income
c) Property held by someone in a fiduciary capacity
This means, by law, if you buy a property in name of your parents, too, can be declared as Benami.
In August, Parliament had passed the Benami Transactions (Prohibition) Act, with the assurance from Finance Minister Arun Jaitley that genuine religious trusts would be kept out of the purview of this new legislation. The new legislation will make a provision of seven-year imprisonment and fine, replacing the three-year jail term, or fine, or both.
What is Benami Act?
First, a Benami transaction is one where a property is held by one person and the amount of it is paid by another person. Therefore, in a Benami transaction, the name of the person who paid the money is not mentioned. Directly or indirectly, the Benami transaction is done to benefit the one who pays.
What isn’t a Benami transaction?
1. Property held under the name of spouse or child, for which the amount is being paid through a known source of income.
2. A joint property with brother, sister or other relatives for which the amount is paid out of known sources of income.
3. Property held by someone in a fiduciary capacity; that is, the transaction involving a trustee and a beneficiary.
What falls under Benami transaction?
Assets of any kind — movable, immovable, tangible, intangible, any right or interest, or legal documents. As such, even gold or financial securities could qualify to be Benami.
How it affects the people?
It is being done to curb on black money. People with unaccounted income will sure have a tough time ahead. As for the general public, it won’t be much of an issue if their transactions are legal.