Benami Property – Real estate is an emerging sector of Indian economy. Being influenced by private players, govt role in this sector is only subjected to a position of working as a legal regulator. With less government intervention, this industry is becoming a “born place to all corruption deals” whereby the super class is exploiting all under the table opportunities.
Also,having limited autonomy in the sector ,government was unable to develop a transparent medium that could restrict corruption and illegal investment activities .Hence in 1988 a special resolution naming “Benami property (prohibition )act ” was passed with a view, to legalize holdings of benami properties under some restricted rules and penalize holders of such property with huge amounts .But in view of certain weaknesses and procedural faults ,the act was not meant to be seriously executed.
In support to war against corruption and black money ,our honourable PM Narendra Modi targeted and uplifted the issue of benami illegal property holdings to be taken out of carpet and amended the historic pages of Benami property act from 1988 to 2016 on 1st Nov.
What the act says about Benami property ?And how it is related to terms benamdar and beneficiary?
1. Property purchased in the name of other person i.e payment being made by one person and registration done in name of other is a benami property transaction .
In other words, any property purchased in name of son/daughter or any other person and not declared while ITR filing of any of them is a benami property.
2. Property term as per law includes investment in land, house shares,debentures,fixed deposits, bank accounts held by a person in name of other.
While the other terms relate as:
The person in whose name the property is purchased is the “benamdar” of property, provided that actual payment is not made by him.
While the person who purchased the property and enjoys benefits of registration charges,interest on loans,tax rebates etc provided the person is not a registered owner of property is a “beneficiary”.
What amendments have been made to Benami transaction prohibition act 2016 ?
Other than making major additions certain small changes have been done to existing provisions as:
1. Person found in guilt of act offence would be given a notice period of 90 days
to show required property documents to the official appointed for scrutiny.
2. Property can now be confiscated by govt in some cases or
3 A penalty of 25% of the market value of property or imprisonment of 3-7 years or both can be levied.
4. For person having a share in joint property not declared in ITR can be penalized with 10% value of market value of the property or imprisonment for 6 months to 5 yrs.
What precautions can be taken to scrutiny measures?
1. Declaring the purchased property in ITR by the assessee
2. If purchased as a joint member ,share in the purchased property should be declared .
Is their any exclusion to act provisions?
Other than strict obligations certain exemptions to act are also given :
1.Property purchased in name of unmarried daughter or wife is exempted from act guidelines.
2.If property is transferred from one person to other by preparing legible attorney papers or will documents ( being already declared in ITR by the owner)
3.Property being in a transaction of transfer of ownership under Transfer of property act 1882 is not a benami property.
4.In case of HUF, Karta being the elder person can purchase property in name of any HUF members,which subject to a condition of getting it done with full documentation.
So,it is better for an assessee to follow abided laws rather getting noticed for an illegal job.