Any transaction in which property is transferred to one person for a consideration paid or provided by another person is considered as Benami transaction. In such cases, a property is held for the immediate for future benefit, direct or indirect, of the person.
The Benami Transactions (Prohibition) Amendment Bill, 2015 was introduced in Lok Sabha on May 13, last year by Finance Minister Arun Jaitley.
Which transactions are not considered as Benami Transactions?
- The property is held for his benefit or benefit of other members of the family and the consideration for such property has been provided or paid out of the known sources of income of the Hindu undivided family or Karta.
- A person standing in a fiduciary capacity for the benefit of another person towards whom he stands in such capacity and includes a trustee, executor, partner, director of a company.
- An individual holding property in the name of his spouse or in the name of any child of such individual and the consideration for such property has been provided or paid out of the known sources of income.
- Any person holding property in the name of his brother or sister or lineal ascendant or descendant, and the consideration for such property has been provided or paid out of the known sources of income of the individual.
What could be considered Benami property?
Benami property can be any kind of assets such as movable, immovable, tangible, intangible, or legal documents. In some cases, even gold or any financial securities could qualify to be Benami.
What is the fine or punishment under Benami transaction act?
The penalty for entering into Benami transactions can be imprisonment up to three years, or a fine, or both.
As per the latest amendment, there is a rigorous imprisonment up to seven years, and a fine which may extend to 25% of the fair market value of the Benami property.
As per the bill, the penalty for providing false information to be rigorous imprisonment of six months up to five years, and a fine which may extend to 10% of the fair market value of the Benami property.
Benamidar is a person in whose name the Benami property is held or transferred, and a beneficial owner of the person for whose benefit the property is being held by the Benamidar.
In the stock scam that broke-out in the 1990s, there were several cases of benami shares floating around. In fact, according to some estimates there were shares aggregating almost Rs 400 crores that were involved.
Now with shares being traded in the demat form only, the worry of benami shares has been taken care off to a large extent.