What is Benami Property?
Recently due to demonitisation of Rs 500 and Rs 1000 notes, other modes of black money circulation are also in news. Real estate (e.g., benami properties) along with gold & jewelery remains one of the most prominent investments through black money. So along with notes demonitisation, we should expect other rulings to track and control their spread.
In the context of real estate, most people are not knowledgeable about the meaning of benami property. Literally "Benami" means "nameless". Technically speaking, the benami property or real estate transaction is defined by "Benami Transaction Act and Bill" as following:
The Act defines a benami transaction as a transaction where a property is held by or transferred to a person, but has been provided for or paid by another person. The Bill amends this definition to add other transactions which qualify as benami, such as property transactions where: (i) the transaction is made in a fictitious name, (ii) the owner is not aware of denies knowledge of the ownership of the property, or (iii) the person providing the consideration for the property is not traceable.
In simpler terms, benami property happens when:
A person having lot of black money buys land, apartment or other form of property using black money.
Instead of registering in his name, he registers it in someone else name (e.g., his driver name) to avoid detection (and thus avoid giving his PAN or aadhar during the registration)
There are few prominent exceptions:
Property registered in the name of spouse or child for which the amount is paid out of known sources of income is not benami.
A joint property with brother, sister or other relatives for which the amount is paid out of known sources of income is not benami
Punishment for keeping black money in Benami Properties
As per Benami Transactions (Prohibition) Amendment Act, 2016, people keeping benami properties to evade taxes will get
- Rigorous imprisonment for a term which shall not be less than one year, but which may extend to seven years
- May also be liable to fine upto 25 per cent of the fair market value of the property.