The decision was taken at a Cabinet meeting chaired by Prime Minister Manmohan Singh here.
It was decided that subsequently, a new Benami transactions (Prohibition) Bill 2011 will replace the existing Benami Transactions (Prohibition) Act, 1988.
"The new Bill contains elaborate provisions dealing with the definition of benami transaction and benami property, prohibited benami transactions, consequences of entering into a prohibited benami transaction and the procedure for implementing the benami law," Information and Broadcasting Minister Ambika Soni told reporters here.
Under the proposed new law, anyone violating the rule can be jailed for not less than six months, which may be extended to two years and also be liable to a fine.
Explaining the need for a fresh legislation, the minister said: "It was found that owing to infirmities in the (existing) legislation, formulation of rules would not be possible without a comprehensive legislation by repealing the Act".
"Properties held by coparcener in a Hindu undivided family and property held by a person in fiduciary capacity are excluded from the definition of benami transaction", she said.
The Minister further pointed out that "properties acquired by an individual in the name of spouse, brother or sister or any other lineal ascendant or descendant are benami transactions which are not prohibited".
Benami transactions are one of the notorious sources of circulation and investment of black money. The government has been facing heat on black money from the Supreme Court, civil society and Opposition for not doing enough to deal the menace.
Soni said "a benami property shall also be liable for confiscation by the adjudicating authority after the person concerned has been given due opportunity of being heard".
Benami, a Persian word, means without name. In such transactions a property is purchased in someone else`s name.
The person in whose name the property is purchased is not the real beneficiary but merely represents the real owner.
The minister said after Cabinet`s approval, the proposed Bill would be tabled in Parliament. She, however did not offer a timeline.
Benami tansaction, where a propoerty is purchased
We are encouraging properties to be registered in the names of women, of girl child It has been adquately provided in this new Act RKL