What is a Benami property?
The word ‘Benami’ means ‘anonymous’ or ‘without a name’, in English. When a person purchases a property in the name of a proxy it’s called a Benami property. In most of the cases, the name of the person/s in records is/are different from the one who is purchasing it. In this kind of transactions, the person on whose name the property has been bought is called the Benamdar and the property is called Benami property. The person who pays for the buy is the real owner.
The dark side
As an old practice, to avoid taxation and evade interferences from IT department people invest and sidetrack their black money by buying Benami property. More than often the real owner/s of these properties is/are difficult to trace as they use fake identities to mask the odds. The Benami route is also taken by hawala channels to route black money very often. There are offenders who hoard the black income in cash and many of the tax evaders invest their illegal money in buying Benami properties. This practice disturbs the revenue system of Government and harms the growth of the state and the country.
What’s good and what’s not
Followings are the transactions which are not Benami:
Properties purchased in someone else’s name which don’t fall under the above categories may be termed as Benami. Under present Government majors steps are being taken to eradicate the black money system and at present strict actions are being taken against Benami properties.
Laws against Benami Properties
The first act against Benami properties came into existence in 1988 as the Prohibition of Benami Property Transactions Act, 1988.The Government of India decided to amend the act, a bill was introduced in the Parliament in 2015 and from 1 November 2016, it finally came into effect.
Under The PBPT act once a property is marked Benami by the concerned department a thorough investigation will be carried out and if found guilty the convict is liable to face rigorous imprisonment for 1 year to 7 years. Additionally, 25% of the property value at current rate will be charged from the Benamidar. If anyone furnishes false information about a Benami property, under the Benami Act he/she is prosecutable and may be imprisoned up to 5 years along with fine up to 10% of market value of the Benami property.
There are also provisions for confiscation of such properties without any compensation to the owner.
The Real Estate context
Unlawful real estate transactions took a huge blow when the historic Demonetization drive was delivered. Prime Minister Mr. Narendra Modi came down heavily on black money holders and naturally Benami property was the next in line. The act will certainly limit people from laundering their black money into real estate. The obvious aftermath of this would be better transparency in real estate transactions. Post Benami property act and RERA it may not be wrong to expect that there will be realistic price corrections and better accountability in Indian real estate space.
Authored: 9amstories editorial
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