Benami Transaction

Benami Transactions (Prohibition) Act, 1988 (amended 2016)

A transaction in which property is held by one person but the real beneficial owner is another — typically used to conceal assets from creditors or tax authorities. The Benami Transactions (Prohibition) Amendment Act, 2016 criminalises benami transactions and allows the Adjudicating Authority to confiscate benami properties.

In practice, a benami transaction is the device used to hide assets from creditors or tax authorities by holding property in one name while another person really owns and funds it. Under the Benami Transactions (Prohibition) Act, 1988, as amended in 2016, such transactions are prohibited and an Adjudicating Authority can confiscate the benami property, and the conduct can also feed into money-laundering and fraudulent-transfer concerns when a defaulting borrower parks assets in a relative's or employee's name. Creditors and investigators look for the classic markers, who provided the consideration, who enjoys and controls the property, and whether the ostensible owner has the means to have bought it. Establishing benami status turns on tracing the source of funds and the real intent, which is evidence-heavy. The stakes are high for the holder, since confiscation vests the property away entirely. Well-advised parties confirm the funding trail and beneficial ownership before relying on, or challenging, a benami claim.