About Benami Transaction

Topic: money laundering

Benami Act

Context:

The Income-Tax Department is scrutinizing all unexplained credits and investments in personal as well as corporate income-tax filings and is looking to invoke the Benami Act in many cases. Unexplained credits, in the books of a company or bank accounts of individuals, have so far been treated as black money, attracting a higher tax of up to 80%.

About the Benami Act:

The Benami Transactions (Prohibition) Amendment Act, 2016, designed to curb black money and passed by parliament in August, came into effect on November 1, 2016. The new law amends the 1988 Benami Transactions Act.

Highlights of the Act:

• The law provides for up to seven years’ imprisonment and fine for those indulging in such transactions.
• The law prohibits recovery of the property held benami from benamdar by the real owner. As per the Act, properties held benami are liable for confiscation by the government, without payment of compensation.
• An appellate mechanism has been provided under the act, in the form of an adjudicating authority and appellate tribunal. According to the government, the four authorities who will conduct inquiries or investigations are the Initiating Officer, Approving Authority, Administrator and Adjudicating Authority.

What is benami transaction?

A benami transaction is one where a property is held by one person and the amount for it is paid by another person. Therefore, in a benami transaction, the name of the person who paid the money is not mentioned. Directly or indirectly, the benami transaction is done to benefit the one who pays.

Join GS paper 3 Guidance- mail at indianeconomyias@gmail.com