Introduced in 1988, the Benami Transactions (Prohibition) Act prohibits benami transactions, providing the government the right to recover benami properties. The widespread transactions of such nature in the country made it essential to frame an act of this statute. 

If you wish to know what benami transactions mean in detail, consider reading through the following sections.

A Benami transaction, as defined under the act, is one in which a person receives or holds property while another person provides or pays for the consideration. 

For example, suppose a person name ‘Ray’ purchases a property but has registered it in the name of some other person. In this case, the property would be labelled as a benami property. The law will also stand in place if Ray denies his association with any such property.

However, note that a piece of property cannot be deemed Benami if it is owned by a Hindu Undivided Family (HUF) member on behalf of the family, his spouse, or his kids. Additionally, if the asset is held in a fiduciary capacity involving a trust, it escapes the reach of the law.

In this case, a property is transferred by one person, and another person pays the purchase price of such property. Further, the following transactions also fall under Benami property:

• Property transactions carried under a fictitious name.
• If the owner denies any knowledge of the property.
• If the owner’s identity is unknown.

The Benami Transactions (Prohibition) Act excludes the following types of transactions:

• Property possessed by a member of a Hindu Undivided Family.
• Any person who holds a property in a fiduciary capacity, such as a trustee, company director or trade participant.
• Individuals holding property in the name of their spouses or children.
• People holding property jointly with their siblings or lineal descendants.

If someone is found violating the principles of the Benami Transactions Act, he/she will be liable for punishment. The various punishments under this act include:

• Benami property’s confiscation
• 1 to 7 years of imprisonment
• A fine of up to 25% of the property value

If a person who needs to provide information provides false details, the punishment includes the following:

• 6 months to 5 years of imprisonment
• A fine of up to 10% of the property value

The Benami Transactions Act allows the central government to implement rules for the intended use in granting authorisation to acquire property which is benami in nature, as well as the manner and process used during the acquisition of the property.

Furthermore, to create a solid legal framework for Benami transactions, this Act was modified in 2016 to offer thorough regulation for authority, transactions, and other pertinent topics.