All you should know about New Benami Act that comes into effect from Nov 1

New legislation to have a provision for seven-year imprisonment and fine, replacing the three-year jail term, or fine, or both

A new law to prohibit illegal benami transactions, under which up to seven years of imprisonment and penalty for those indulging in such activities could be handed out, would come into effect from November 1, the finance ministry had said on Friday.

In August, Parliament had passed the Benami Transactions (Prohibition) Act, with the assurance from Finance Minister Arun Jaitley that genuine religious trusts would be kept out of the purview of this new legislation.

“The rules and all the provisions of the Benami Transactions (Prohibition) Act shall come into force on November 1, 2016. After coming into effect, the existing Benami Transactions (Prohibition) Act, 1988, shall be renamed as the Prohibition of Benami Property Transactions Act, 1988,” the Central Board of Direct Taxes (CBDT) said in a release.

The new legislation will make a provision of seven year imprisonment and fine, replacing the three-year jail term, or fine, or both.

Here is a look at what the act is all about and how it is going to affect the people

What is benami Act?

First, 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.

What isn’t a benami transaction?

1. Property held under the name of spouse or child, for which the amount is being paid through a known source of income.

2. A joint property with brother, sister or other relatives for which the amount is paid out of known sources of income.

3. Property held by someone in a fiduciary capacity; that is, transaction involving a trustee and a beneficiary.

What falls under benami transaction?

Assets of any kind — movable, immovable, tangible, intangible, any right or interest, or legal documents. As such, even gold or financial securities could qualify to be benami.

How it affects the people?

It is being done to curb on black money. People with unaccounted income will sure have a tough time ahead. As for the general public, it won’t be much of an issue if their transactions are legal.