16 Responses to THE BENAMI TRANSACTIONS: Meaning, Analysis and Implications

  1. Gopal says:

    Dear sir,

    Its amazing and so informative information u are proving to so many desired persons. thanks. I was just reading the comments and your reply. thanks for every information you have provided and updated.

    I have a question:
    I have FD/House/pension in India, this is the first visit to foreign country with my children. i may not stay here permanently. do i have to open NRO/NRE account for transferring the money abroad or thru exisiting saving bank a/c source, can we do it. If i sell my property in future.
    Thanks for the response in future.
    gopal

    • Jigar Patel, CFA (USA), MBA-Finance (USA), CPA (USA), CA (India) says:

      Only if you are a Non-Resident under FEMA, you are allowed to have NRO/NRE account. As a resident, you are allowed to transfer upto $250,000 per year under LRS – Liberalized Remittance Scheme. I won’t think you would need such high amount every year to pay for exps. The money under LRS can be transferred from your resident bank account. Thanks.

  2. Gouri says:

    Dear Mr.Jigar Patel,
    Thank you very much for the detailed information. Would like to get more information in the case below.
    A relative of mine, who is an NRI, is transferring funds to his parent (who is a resident in India) and parent is investing in equities in India, without knowing that it is a benami transaction. How to correct this? Can the parent transfer the money back to his son’s NRO account without any issues ? Or, can the parent transfer the equities to his son’s demat account ?

    Thanking you in advance.
    Gouri.

    • Gouri says:

      Appending to my earlier post:
      Can my relative or his parent report this directly to income tax authorities that they have done it unknowlingly ? Will the IT authorities give chance of taking corrective measures ?

      Thanks,
      Gouri

      • Jigar Patel, CFA (USA), MBA-Finance (USA), CPA (USA), CA (India) says:

        It is okay provided the money from NRI son to his parent is a gift and not a loan. NRI son is allowed to gift his parents without any income tax consequences. Thanks.

        • Gouri says:

          Thank you very much for your prompt reply.
          Would like to get one more clarification. Parent is investing this money into equities. How to prove that it is not on behalf of his NRI son. If the parent is not mentioning his son as his NRI son as nominee, is sufficient ?

          Thank you,

          • Jigar Patel, CFA (USA), MBA-Finance (USA), CPA (USA), CA (India) says:

            I would recommend to have a gift deed/letter from son to parents. Thanks.

  3. Shiwani Sharma says:

    This is a very informative and helpful post, very honest and practical advise. Thank you so much for a detailed post. It’s very helpful for all .Specially this complete information will be helping to all. Thanks!

  4. Vardhman Jain says:

    This Information really helps me to understand what actually is Benami Transaction.
    And I think no one can give such type of best examples other then you.
    Thank you

  5. Majid says:

    Dear Sir,
    Thanks for detailed information.
    I would like to know further,
    If a seller is not accepting money from an NRI account and buyer is paying money to seller through buyer’s brother bank account and getting registration of land on buyer himself as NRI.
    Is it also to treated as non benami transactions.
    Waiting for your advise.
    Regards

    • Jigar Patel, CFA (USA), MBA-Finance (USA), CPA (USA), CA (India) says:

      I think this may be a classic case of a benami transaction if both brothers are not the joint holders of the property. Also, I haven’t heard any seller having restrictions of accepting funds from NRI account. Thanks.

  6. Vasanth H says:

    Additional information

  7. Rajneesh says:

    Thanks for your wonderful articles. Really impressed. I am USC living in India for last 9 years. I have joint demat (with parents) with shares worth Rs25L. Most of the shares were purchased by my father 20-25 years ago. Cost price unknown as physical shares were converted to demat long time ago & there could be shares given under rights issues by companies.

    I had purchased some (may be Rs2 lakh) in last 9 years. I wish to gift my parents the shares as most of it is their money. Can I transfer the shares to their demat? Will the gift be ok with India and US considering the limits for gift as per US law and considering the new benami law?

    • Jigar Patel, CFA (USA), MBA-Finance (USA), CPA (USA), CA (India) says:

      1. In India, there is no tax on gift received by close relative so is a tax exempt gift for your father and you.
      2. For USA, as the value of investment is 25L i.e. more than $14000, as a US citizen, it is above the threshold of gift tax. So, you would have to pay gift tax in USA. However, if you make a declaration to be counted as a part of your lifetime gift (estate duty limit), there won’t be any tax to you. I would assume that you have reported your Demat account in your FBAR/FATCA compliance requirement. Else, how can you give gift of money that you did not own? Thanks.

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