Benami Property Rules & Penalties

The Prohibition of Benami Property Transactions Act, 1988 (amended in 2016) stops people from buying property in someone else's name to hide black money or avoid taxes. A "benami" means "without a name" — i.e., the real owner hides behind another person's name.

What is a Benami Transaction?

A benami transaction happens when:

• Someone pays for property but registers it in another person's name (like spouse, friend, employee, etc.), and
• The real owner's identity or money source is hidden.

Example: If Mr. X buys land but registers it in his driver's name, that's benami.

What the Law Says

• All benami transactions are illegal.
• Such properties can be seized by the government.
• False names, unclear ownership, or undisclosed sources of money can trigger investigation.
• Both the person who pays and the one who lends their name are guilty.

Punishments for Benami Dealings

Exceptions – What is Not Benami

Authorities & Process

How to Stay Safe While Buying Property

• Use your own funds — never use cash of unknown source.
• Disclose relationships clearly in documents (e.g., "bought in wife's name from husband's income").
• Avoid proxy ownership (using employees, cousins, or friends).
• Keep payment proofs — bank transfers, loan records, and tax filings.
• Check the property chain of title to ensure it isn't already under suspicion.

FAQs – Benami Property Law

1. What is a benami transaction?

When property is bought in another person's name to hide real ownership or black money.

2. Why do people do it?

To avoid taxes or hide illegal income.

3. Are all such properties illegal?

Yes. Every benami property can be confiscated.

4. What if I buy a house in my wife's name?

It's legal if you use declared income and disclose the relationship.

5. What happens if caught?

You can lose the property, get fined, and face up to 7 years in jail.

6. Who can take action?

Income Tax officers and designated authorities.

7. Can the government take property without compensation?

Yes. Confiscation is without any payment.

8. What about power of attorney?

That's not benami if the owner and payer are the same person.

9. Can I sell or transfer a benami property?

No. It's illegal and void.

10. What if I didn't know my name was used?

You can defend yourself, but must prove lack of knowledge.

11. Is ancestral property benami?

No, if inherited legally and declared properly.

12. Are gifts to relatives benami?

Not if done using legal income and valid documentation.

13. Can the property be seized without court approval?

No. It needs approval from the adjudicating authority.

14. Can I appeal against action?

Yes, to the Benami Appellate Tribunal or court.

15. Does it cover movable assets too?

Yes, includes land, houses, gold, shares, and cash.

16. Can company directors hold property in trust?

Yes, if done in a fiduciary capacity, not for hiding money.

17. Can benami transactions be old?

Yes. The 2016 amendment covers even past cases if pending.

18. Is the law linked to black money?

Yes. It supports India's anti–black money framework.

19. What is the fine limit?

Up to 25% of the property's fair market value.

20. Can both buyer and benamidar be punished?

Yes. Both face equal legal action.