The Benami Transaction Act 2016 is a law passed by the Indian Parliament that forbids certain financial transactions. A 'Benami' transaction is defined under the Act as any transaction in which property is transferred to one person in exchange for payment from another person.
Such transactions were common in India's economy, mainly involving the acquisition of real estate, and were considered to add to the country's black money issue. The legislation outlaws all Benami transactions and provides the government with the power to seize property held in trust for others without having to pay a fee.
Timeline of the Benami Transaction Act
- After analyzing numerous Acts and the existing Benami system, the Law Commission of India suggested drafting an Act to address the problem in 1973.
- As a result, Parliament passed the Benami Transaction Act, which took effect on 19th May 1988.
- However, due to several flaws in the Act, the rules needed to put it into effect were not drafted.
- To remedy these flaws, the Indian government introduced the "Benami Transaction (Prohibition) Bill, 2011" some years later.
- The Benami Transaction Act of 1988 consisted of only eight sections. This Act was later modified and amended to the Benami Transaction Act 2016, which was a compilation of 72 Sections.
- In July 2016, the Modi government opted to alter the original statute, which the Indian Parliament later enacted as "The Benami Transaction Act 2016."
- Following that, the government announced that the Act's provisions will take effect on 1st November 2016.
Benami Transaction Act 2016
- According to the Government of India, a Benami transaction is said to be the one in which (1) the Property is owned or transferred by one person but is supplied for or paid for by another, (2) the transaction is conducted under a false name, the owner is unaware of or denies knowledge of the property's ownership, and (3) the property's consideration given by the individual is untraceable.
- The Benami Transaction Act 2016 provides for an Appellate Tribunal to consider appeals from the Adjudicating Authority's orders.
- The high court will hear appeals from the Appellate Tribunal's orders.
- The trial should be completed within six months of the complaint being filed with the special court.
- The bill proposes the creation of four authorities to undertake inquiries or investigations into Benami transactions: (1) an initiating officer, (2) an approving authority, (3) an administrator, and (4) an adjudicating authority.
Punishment Under the Benami Transaction Act
The following are the main types of punishment authorized under the Benami Transaction Act:
Any person who engages in or abets/induces another person to enter into a Benami transaction to defy the requirements of any law, prevent payment of statutory dues, or avoid payment to creditors would be punished as follows:
- Imprisonment for 1 to 7 years, and
- a fine of up to 25% of the property's fair market value
If a person who is compelled to disclose information under Benami Transaction Act gives incorrect information, he is subject to the following penalties:
- Imprisonment for 6 months to 5 years, and
- a fine of up to ten percent of the property's fair market value
According to the government's Press Information Bureau website, show-cause letters were issued in over 2,100 instances involving Benami properties worth over '9,600 crores as of 31st May 2019. The government has taken many efforts to ensure that the Benami Transaction Act is properly implemented.
FAQs on Benami Transaction Act
Q.1. Who legislated the Benami Transaction Act?
Ans. The Parliament of India legislated the Benami Transaction Act.
Q.2. When was the Benami Transaction Act established?
Ans. The Benami Transaction Act, 1988 was established on 19th May 1988.
Q.3. When was the Benami Transaction Act of 1988 amended?
Ans. The Benami Transaction Act of 1988 was amended to the Benami Transaction Act in 2016.
Q.4. What does Benami Transaction mean?
Ans. Benami Transaction means any transaction of property made, held, done, or transacted in the name of another person.