After Demonetization, the next focus of Indian government to curb black money is Benami
Properties. Because of relaxed provisions, informal ways of doing things until now, it became part of
a normal business to do certain things in the name of tax planning or to circumvent the laws. As a
result, it is entirely possible that a person would enter into a Benami Transaction without even
realizing the same.
However, with increased compliance, government effort to curb black money and provision
of mandatory rigorous imprisonment for guilty, it is extremely critical to understand the
meaning and implications of a Benami Transaction.
The Benami Transactions (Prohibition) Amendment Act, 2016, which is an amendment of the
older Benami Transactions (Prohibition) Act 1988 defines and regulates the Benami
Properties/Transactions and is effective from November 1, 2016.
Property would include asset of any kind, whether movable or immovable, tangible or
intangible, and includes rights or interest as well as proceeds from the property.
1. Financial penalty up to 10% of the fair market value of the property and
2. Rigorous imprisonment of minimum 6 months to maximum of 5 years.
My Advice:
1. Please do not be complacent and think that “nothing will happen to you” or “this is how
things are done in India” or “I am a very small fish” or “no one will know” or “I have
done this many times in past”, etc.
2. Before transferring money to someone else, relative or not, please define the nature of
transfer; i.e. whether it is a loan, gift or income. The rules, requirements and conditions as
per applicable laws (e.g. FEMA, Income Tax, etc.) for the respective nature need to be
complied with.
3. It is important to realize that as Income Tax returns are filed individually, there is no
“joint” concept in true sense and is mainly for convenience in India. Person who has
invested the money is considered the real owner. Please ensure that the transaction is not
a Benami Transaction.
4. If by mistake, you have entered into a Benami Transaction, seek an experienced
professional help to remedy the same.