“If the country has to progress, the citizens must respect the system, institutions and rule of law. It is evident that efficiency and effectiveness in governance are not sustainable without probity, transparency and accountability.”
Prohibition of Benami Property Transactions Act is a step taken by government which will help to strengthen the legislation against accumulation and menace of black money empowering the taxman to confiscate and hold ‘Benami’ property.
Benami literally means ‘nameless‘ or ‘without a name‘. Thus, a transaction is considered to be benami when the consideration for a property that is transferred to a person or held by that person is paid by another person and the property is held for the future benefit, direct or indirect. Person holding the benami transaction is termed as ‘benamidar’ and the person for whose benefit the property is held is called ‘beneficial ower’. To curb corruption and check generation of domestic black money the government introduced new Benami Transaction (Prohibition) Bill which provides for stringent measures against violators.
Benami Transactions (Prohibition) Act was first passed in 1988 to put an end to such transactions, and to empower the government to recover such property. The Act of 1988, had several inherent loopholes, including the absence of an appellate mechanism and lack of provisions for vesting of the confiscated property with the Centre. Owing to these infirmities, the UPA government introduced a Benami Transactions (Prohibition) Bill, 2011, to replace the 1988 Act, which however lapsed with the dissolution of the 15th Lok Sabha. The NDA government again introduced the Bill with the amendments to make it stronger and target benami transactions. The Bill seeks to ensure that if any person enters into a benami transaction in order to evade tax or avoid payment to creditors i.e. the ultimate beneficiary owner or persons abetting or inducing any person to undertake such a transaction shall suffer rigorous imprisonment.
The National Assembly’s Standing Committee on Finance approved the draft of Benami Transactions (Prohibition) Act, 2016 on August 16, 2016 and the Benami Transactions (Prohibition) Amendment Act, came into force on November 1, 2016, renaming the existing Benami Transactions (Prohibition) as the Prohibition of Benami Property Transactions Act (PBPT Act). The purpose of this legislation is to prohibit property in ‘Benami’ with the objective to restrict the right to transfer benami properties and provide mechanism to confiscate benami properties as these transactions are generally taken to fraud creditors, evade taxes and avoid social and political risk in holding property .The 2016 Act has also safeguarded mechanisms such as the adjudicating authority and the appellate mechanism for appeals. However, transactions and arrangements such as properties held by a person in fiduciary capacity, properties acquired out of the known sources of income by an individual in the name of spouse or children and properties acquired in the joint name of individuals and lineal ascendant or descendant acquired from the know sources of income of the individuals shall be excluded from the purview of benami transactions and arrangements.
Thus, 2016 portends to be a pertinent year with Prohibition of Benami Property Transactions Act (PBPT Act) coming into effect from November 1, 2016 which is one of the most important legislation introduced in the country which will have far reaching consequences inter alia in the fields of finance, tax and banking sectors.