Benami property refers to a property without a name. In Hindi Benami means without name. So property bought by a person, not under his true name is called a Benami Property. Even though the property is bought in someone else’s name, the person who has paid for the property is the real owner. The person in whose name the property is bought is called Benamdar. The main intention of buying the property in someone else's name is to hide the source of funds.
Benami property does not include the property bought in the name of your spouse or child, for which the payment is made from a known source of income. Also, a joint property with sister, brother and other relatives for which money is paid out of known sources of income, does not fall under Benami property. The property bought in the name of your parents can also be declared as Benami, if you do not make the payment from known sources of income. To avoid paying tax, people invest their money in Benami Properties.
Benami transaction consists of buying assets of any kind such as movable, immovable, tangible, intangible, any right or interest, or legal documents.
Laws against Benami property:
To act against benami properties "Prohibition of Benami Property Transactions Act" was passed in the year 1988. With the intention of eradicating black money, the government decided to make corrections to the original act in July 2016. Benami Transactions (Prohibition) Amendment Act, 2016, came into force on November 1, 2016. The act defines what are Benami transactions, prohibits Benami transactions and also states that violation of the act is punishable with imprisonment and a fine. According to the act, the benami property held by the Benamdar, cannot be recovered by the real owner. The government can confiscate the benami property without paying any compensation.
How do benami transactions affect normal people?
The main intention of investing money in benami properties is to evade tax and hide black money. This process hampers the growth and development of the economy, as revenue generation of the government gets affected. As these people do not pay taxes, the Government fails to successfully implement its policies and schemes due to lack of sufficient resources.