The Benami Transactions (Prohibition) Act, 1988
Parliament of India
  • An Act to prohibit benami transactions and the right to recover property held benami and for matters connected therewith or incidental thereto.
CitationTHE BENAMI TRANSACTIONS (PROHIBITION) ACT, 1988;[1] THE BENAMI TRANSACTIONS (PROHIBITION) AMENDMENT ACT, 2016[2]
Enacted byParliament of India
Commenced19 May 1988[3]
Status: In force

Benami Transactions (Prohibition) Act, 1988 (name changed to Prohibition of Benami Property Transactions Act, 1988 by section 3 of the 2016 amendment[4]) is an Act of the Parliament of India that prohibits certain types of financial transactions. The act defines a 'benami' transaction as any transaction in which property is transferred to one person for consideration paid by another person.[5][6] Such transactions were a feature of the Indian economy, usually relating to the purchase of property (real estate), and were thought to contribute to the Indian black money problem. The act bans all benami transactions and gives the government the right to recover property held benami without paying any compensation.[7]

The act came into force on 5 September 1988. Although benami transactions are now illegal, the act had limited success in curbing them. Updated versions were therefore passed in 2011 and 2016, seeking to more comprehensively enforce the prohibitions.

Etymology

Benami is an Urdu word that means "without name" or "no name". In this Act, the word is used to define a transaction in which the real beneficiary is not the one in whose name the property is purchased.[8] As a result, the person in whose name the property is purchased is just a mask of the real beneficiary.[9]

Background

In 1973, the Law Commission of India after studying various Acts and prevailing benami system, recommended formulating an Act to tackle the issue. Accordingly, the Benami Transactions (Prohibition) Act, 1988 was enacted by the Parliament which came into force on 19 May 1988.[3]

However, due to various deficiencies in the Act, the rules required for operationalizing the Act were not framed. To address these deficiencies, several years later, in 2011, the Govt of India introduced "Benami Transactions (Prohibition) Bill, 2011".[3][9]

Amendments

In an attempt to curb black money, in July 2016, Modi government decided to amend the original act[10] which was subsequently passed by the Parliament of India as "The Benami Transactions (Prohibition) Amendment Act, 2016". Thereafter, the Government notified the provisions of the act to come into force from 1 November 2016.[8] Mint newspaper reported that the Benami act along with the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015, will help the Government in its fight against black money both within and outside the country. The 2016 Act also has safeguard mechanisms such as the adjudicating authority and the appellate mechanism for appeals.[11]

The act "prohibits illegal benami transactions, and provides imprisonment up to seven years and fine for violation of the Act which may extend to 25% of the fair market value of the benami property."[8]

Enforcement

Authorities

The Act establishes four authorities who will be able to conduct inquiries regarding benami transactions:[12]

Sl. No.Name of AuthorityPost of AuthorityResponsibility
1Initiating OfficerAssistant Commissioner of Income-Tax (ACIT) or a Deputy Commissioner of Income-Tax (DCIT)Notice and attachment of property
2Approving AuthorityAdditional Commissioner of Income-Tax (AdlCIT) or a Joint Commissioner of Income-Tax(JCIT)Notice to furnish evidence
3AdministratorIncome Tax Officer (ITO)Possession and management of properties confiscated
4Adjudicating AuthorityOfficers Drawn from ITDConfiscation and vesting of property

Results

On 26 July 2017, the Modi government told the Rajya Sabha that after coming into force from 1 November 2016, properties worth over ₹800 crore (US$122.85 million) were under attachment in more than 400 proxy transaction cases identified so far. Furthermore, the government has set up 24 Benami Prohibition Units (BPUs) across India for taking action under the Benami Act.[13]

See also

References

  1. ↑ "THE BENAMI TRANSACTIONS (PROHIBITION) ACT, 1988" (PDF). dea.gov.in.
  2. ↑ "THE BENAMI TRANSACTIONS (PROHIBITION) AMENDMENT ACT, 2016" (PDF). The Gazette of India. 11 August 2016. Retrieved 10 January 2019.
  3. 1 2 3 "58th Report of the Standing Committee on Finance on the BTP Bill, 2011" (PDF). Archived from the original (PDF) on 22 October 2013. Retrieved 22 October 2013.
  4. ↑ Gazette notification of the 2016 amendment
  5. ↑ "Benami Transaction_Prohibition_ Act, 1988" (PDF). Archived from the original (PDF) on 12 August 2013.
  6. ↑ The Benami Transactions (Prohibition) Act, 1988. Universal Law Publishing. p. 1. Retrieved 12 July 2015.
  7. ↑ "Benami Act provisions to come into force from 1 November". Livemint. 28 October 2016. Retrieved 17 February 2017.
  8. 1 2 3 "Smart things to know about benami property transactions", The Economic Times, 28 November 2016
  9. 1 2 "Cabinet approves new act to deal with benami transactions". The Times of India. 21 July 2011. Archived from the original on 23 April 2013. Retrieved 22 October 2013.
  10. ↑ "Cabinet approves benami transactions bill". Retrieved 28 October 2016.
  11. ↑ "Benami Act provisions to come into force from 1 November". Retrieved 28 October 2016.
  12. ↑ "India: Concise Overview Of The Prohibition Of Benami Transactions Act, 1988". Mondaq.
  13. ↑ "Benami properties worth over Rs 800 crore attached: Centre". Retrieved 26 July 2017.
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