This law is meant to stop people from buying property in someone else's name to hide black money or avoid taxes. Such hidden ownership is called a "benami transaction."
The 2016 amendment made the law stricter, with clear definitions, punishments, and powers to seize such properties.
What is a Benami Transaction?
- A person buys property but uses someone else's name (like a friend, relative, or employee).
- And the person who paid the money hides their identity.
What the Law Says:
- All benami transactions are illegal.
- Properties bought in someone else’s name (without valid reason) can be seized by the government.
- False names, false ownership, or unclear sources of money can be treated as benami.
Punishment:
- Up to 7 years of imprisonment
- Fine up to 25% of the property's market value
- Confiscation of the entire property
Exceptions (these are not benami):
- Property bought in the name of spouse or child, using known legal income
- Property held in the name of joint family members (HUF)
- Property held in a fiduciary capacity (like a trustee, company director, etc.)
Benami Transactions Act – FAQs
Q. What is a benami transaction?
A. It’s when someone buys a property but registers it in another person’s name to hide real ownership.
Q. Why do people do benami transactions?
A. To hide black money, avoid taxes, or hide illegal assets.
Q. Is benami property illegal?
A. Yes. All benami properties are illegal under this Act.
Q. What happens if someone is caught doing a benami transaction?
A. The property is seized, and the person may go to jail for up to 7 years and pay a heavy fine.
Q. Who can take action under the Act?
A. Income tax authorities and special courts can investigate and take action.
Q. Is it okay to buy property in my wife’s or child’s name?
A. Yes, only if the money used is legal and properly accounted for.
Q. Can the government take my benami property without compensation?
A. Yes. The law allows confiscation without paying you anything.
Q. Is giving someone power of attorney the same as a benami transaction?
A. Not necessarily. It depends on ownership and who paid for the property.
Q. Can I sell a benami property?
A. No. Selling or transferring benami property is also illegal.
Q. What if I didn’t know I was part of a benami transaction?
A. Lack of knowledge may help in defense, but it must be proven.
Q. Can ancestral property be benami?
A. Not if it is properly inherited and declared. But using fake names to transfer such property can be illegal.
Q. Are there any exceptions under the law?
A. Yes. Property held in the names of a spouse, children, or HUF using known income is allowed.
Q. What is the role of the Initiating Officer?
A. The Initiating Officer investigates suspicious properties and starts proceedings.
Q. What is the punishment under this law?
A. Up to 7 years in jail and a fine up to 25% of the property’s value.
Q. Can I fight a benami allegation in court?
A. Yes. There is an Appellate Tribunal and special courts for benami cases.
Q. Is benami law linked to black money laws?
A. Yes. It helps in curbing black money and undisclosed income.
Q. Can the property be taken without court approval?
A. No. It must go through a legal process and order by the adjudicating authority.
Q. Is the law applicable to movable property too?
A. Yes. It includes movable, immovable, tangible, and intangible properties.
Q. Are gifts to relatives considered benami?
A. No, not if made from legal income and properly documented.
Q. Can someone be punished just for being a benamidar (name lender)?
A. Yes. Both the real owner and the name lender can be punished.
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