The document summarizes key amendments made by the Benami Transactions (Prohibition) Amendment Act, 2016 in India. The Act expanded the definition of benami transactions to include property held for someone else's benefit or transactions made under fictitious names. It exempts certain cases like joint family property. The Act also increased penalties for benami transactions and providing false information. In conclusion, while the Act may reduce real estate transactions in the short term, it aims to reduce black money, increase transparency, and make India a more attractive long-term investment destination.

1. HIGHLIGHTS ON THE BENAMI
TRANSACTIONS (PROHIBITION)
AMENDMENT ACT, 2016
Earlier the benami transactions are defined as a “transaction where a property is held by or
transferred to a person, but has been provided for or paid by another person”. This Act has
amended this definition by to add other transactions whichqualify as benami,such as property
transactions or arrangement where:
A. i. where a property is transferred to, or is held by, a person, and the consideration for
such property has been provided, or paid by, another person
ii. the property is held for the immediate or future benefit, direct or indirect, of the person who
has provided the consideration
B. the transaction is made in a fictitious name,
C. the owner is not aware of denies knowledge of the ownership of the property, or
D. the person providing the consideration for the property is not traceable.
The Bill also specifies certain cases which will be exempt from the definition of a benami
transaction. These include cases when a property is held by:
(i) a Karta, or a member of a Hindu undivided family, as the case may be, and the property is held
for his benefit or benefit of other members in the family and the consideration for such property
has been provided or paid out of the known sources of the Hindu undivided family;
(ii) a person standing in a fiduciary capacity for the benefit of another person towards whom he
stands in such capacity and includes a trustee, executor, partner, director of a company, a
depository or a participant as an agent of a depository under the Depositories Act, 1996 and
any other person as may be notified by the Central Government for this purpose;

2. (iii) any person being an individual in the name of his spouse or in the name of any child of such
individual and the consideration for such property has been provided or paid out of the known
sources of the individual;
(iv) any person in the name of his brother or sister or lineal ascendant or descendant, where the
names of brother or sister or lineal ascendant or descendant and the individual appear as
joint-owners in any document, and the consideration for such property has been provided or
paid out of the known sources of the individual
This new law has also increased the penal provisions for ,
1. whoever is found guilty of the offence of benami transaction shall be punishable with
rigorous imprisonment for a term which shall not be less than one year, but which may
extend to seven years and shall also be liable to fine which may extend to 25 per cent of the
fair market value of the property.
2. whoever is guilty in providing false information as required to furnish shall be punishable
with rigorous imprisonment of six months up to five years, and a fine which may extend to
10% of the fair market value of the benami property
Impact on Real Estate
This act would be applicable on any kind of assets movable, immovable, tangible, intangible,
corporeal or incorporeal. It also includes any right or interest or legal documents or instruments
evidencing title to or interest in the property; where the property is capable of conversion into
some other form, then the property in the converted form; and the proceeds from the property. The
act is expected to adversely impact transaction volumes and lower property prices. The act will
ensure that all real estate transactions shall be in the name of actual owner. i.e. actual person
paying the consideration from her/his known sources. One of the major problem in real estate
transactions is clarity of title which limits investor as well as financial Institution participation in
the sector. Transparency issue is one of the negative factor which limits the private equity and
NBFCs
Conclusion
The amendment in the act is a means to reduce generation and utilization of unaccounted (black)
money. This was a pivotal election promise made by the current government. Through this
amendment the government seeks to clearly define ‘Benami‘ transactions, establish adjudicating
authorities and an Appellate Tribunal to deal with Benami transactions, and specifies the penalty
for entering into Benami transactions. Moreover, this will also increase the tax revenue for the
Government by curbing unaccounted money into the system.
In the short term it will lead to a reduction in transaction volumes. However, in the long term it will
make India a more attractive investment destination, aligning transactions with ethical standards
and will increase international institutional investors and financial institutions participation in this
sector.