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In India, strict rules have been enacted to combat black money, tax evasion, and unlawful financial transactions. Laws governing benami property are very important. Although such property transactions have been carried out in secret for many years, the government has taken rigorous steps by executing the Benami Transactions (Prohibition) Act of 1988, which includes heavy penalties and fines. This law was strengthened in 2016, allowing for more stricter enforcement of such transactions.
The purpose of this article is to explain what benami property is, what its legal consequences are, and what laws the government has passed to handle it.
Benami property is defined as assets that are transferred or kept under a benami transaction. Furthermore, any profit or income earned from such property is included in the concept of benami property.
A benami transaction occurs when property is purchased or kept in the name of someone who did not pay for it, with the true payment made by a third party who profits from it directly or indirectly.
Certain cases, however, are exempt from being considered benami transactions, such as property acquired by a Hindu Undivided Family (HUF) head or member from known sources, property held in a fiduciary capacity, property purchased from known sources in the name of a spouse or child, and jointly acquired property with close relatives.
Other benami possibilities include purchasing a property under a false name, when the genuine owner is unknown or denies possession, or when the payment cannot be recognized. If possession of the property is legitimately transferred with paid stamp duty and a recorded agreement (under Section 53A of the Transfer of Property Act, 1882), it is not considered a benami transaction.
A benamidar is the person (or fake person) in whose name the benami property is transferred or kept, including those who just allow their name to be used.
The Benami Transactions (Prohibition) Act of 1988 (amended in 2016) is a strict law in India that prohibits benami transactions and property holdings. It prohibits such transactions, fines offenders, and authorizes the government to seize benami holdings.
No one can purchase property in another person’s name, even if the money is theirs. Violators face up to 3 (three) years in prison, fines, or both, with tougher penalties imposed after 2016.
Anyone with benami property cannot claim ownership or initiate a lawsuit over it. For example, a friend holding property on your behalf cannot lawfully refuse to surrender it, and you cannot utilize the courts to enforce its return.
Benami properties can be taken by the government and turned into permanent assets.
The benamidar is unable to return the property to its rightful owner or anybody else. Such a return would be illegal and illegitimate, unless transferred under Section 190 of the Finance Act of 2016, which is permitted by law.
If the Initiating Officer feels a property is benami, they will notify the benamidar or actual owner and may provisionally attach the property for up to 90 days. Following the inquiry, the case is forwarded to the Adjudicating Authority, with notice provided under the Civil Procedure Code to allow parties to state their position.
The Adjudicating Authority conducts an investigation and, if the property is confirmed benami, orders its confiscation within 1 year; otherwise, the attachment is canceled. Once deemed benami, the property becomes government property, and the owners lose all claim rights.
The government chooses an Administrator to administer and protect confiscated property, which can be sold or utilized for public purposes as needed.
Benami property transactions entail buying or retaining property in the name of someone other than the actual buyer, generally in order to avoid taxes, hide black money, or encourage corruption. The Benami Transactions (Prohibition) Act of 1988, with its 2016 modifications, authorizes the government to seize such properties and inflict harsh penalties on offenders, fostering financial openness and preventing unlawful activity.
Compliance with this rule is critical, as infractions can result in significant fines and imprisonment. Maintaining transparency in property transfers shields individuals from potential legal ramifications. You can get legal advice or assistance from Adv. Abdul Mulla through his websites, http://www.lifeandlaw.in and http://www.asmlegalservices.in.
Adv. Abdul Mulla (Mob. No. 937 007 2022) is a seasoned legal professional with over 18 years of experience in advocacy, specializing in diverse areas of law, including Real Estate and Property Law, Matrimonial and Divorce Matters, Litigation and Dispute Resolution, and Will and Succession Planning. read more….
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