IT Department sends warning against making benami transactions

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IT Department sends warning against making benami transactions

16 January 2018
The IT department is all set to end the “Benami” game and has asked people refrain from making Benami transactions

The Income-tax Department warns people that benami transactions can land you in jail for about 7 years. The recently enacted law states that those who fail to comply with the new mandate will have to face serious consequences, with violations leading to fines and possible imprisonment of up to seven years.

Benami Transactions Prohibition Amendment Act 2016

The first Benami Property Transactions Act came into effect in 1988; it was later amended and renamed the 'Benami Transactions Prohibition Amendment Act, 2016' or the BTP Amendment Act.

 

Related: Benami Act 101: Your guide to understanding the new act

What is the purpose of this act?

According to the Act, properties bought by people but not under their own name are called 'Benami properties'.  There are also several other things that qualify as Benami transactions:

(i) Transactions made under a false or fictitious name name

(ii) If the owner is unaware or denies knowledge of the property's ownership

(iii) The person providing the consideration for the property is not traceable

Related: Property inheritance: What you must know when making your will

This act defines the rules of Benami transactions and prohibits them. Properties held under benami become liable for confiscation by the Government without the payment of compensation.

Since 1 November 2016, the department has been taking action against Benami properties, under the new Benami Transactions (Prohibition) Amendment Act, 2016.

Past record

As per past data, the income tax department has already attached Benami assets, which were a total of Rs. 1,833 Crore in value, all over the country. The I-T department has also issued about 517 notices and has made 541 attachments between 1 November 2016 to October 2017.

Published Advertisement by the government

The government has even published an advertisement in newspapers titled, “Keep Away from Benami Transactions" to create awareness around the same and ensure there is maximum compliance. In an explanation to the public, the government says that Benami is black money, which is a crime and has requested citizens to help in eliminating it.

Related:  How to successfully rent out your home?

The consequences of not complying with the rules

The punishment for Benami defaulters is quite rigorous, and will not only be inflicted on the "Benamidar” or the person who is caught having a Benami property in his/ her name, but also on the beneficiary - the person who actually paid the consideration. Even those who abet and induce these transactions will not be spared.

According to the income tax advertisement, the punishment for all these people include an imprisonment of up to 7 years and a heavy fine of up to 25% of the fair market value of the Benami property.

Related: Property tax: When does it apply to you? [Infographic]

The IT department has also roped in people who deliver incorrect and untrue information to concerned authorities. The IT advertisement clearly states that individuals who furnish false information to concerned authorities under the Prohibition of Benami Property Transactions Act, 2016, can also be prosecuted. Therefore, they will also have to face a punishment, which may include imprisonment of up to 5 years along with a fine of up to 10% of the fair market value of the Benami property.

Not only this, but the government also clarified that the property in question would be attached and confiscated by the government.

Related: HRA: Everything you need to know about it

Consumer aspect

The violation may fall heavy on consumers and may have cascading effects on them. Hence, consumers need to take corrective actions to save themselves from such severe punishment. 

 

Topic: tax, income tax
 
 

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