Legality of benami properties!!

A Benami property is a property wherein the person who actually pays the consideration of the property (purchaser), purchases the property in the name of other person (benamidar), however the purchaser did not intends to make that other person beneficiary of the propertyThe sole purpose of Benami transaction is to facilitate the purchaser to hide him from the transaction for a various number of reasons like protecting himself from creditors, legal heirs, evading taxes etc.


Benami transaction may seem improper but they are not purely illegal unless it is a sham transaction wherein the transfer of the property actually does not takes place but takes place only on the papers. However with the enactment of Benami prohibition act, 1988, section 3(3) of the said act makes the person entering into the Benami transaction as a punishable offence, though according to section 3(2) of the said act there are exceptions which makes benami transaction as legal, mainly

  • If the property is purchased in the name of wife or unmarried daughter.
  • Any coparcener in HUF.
  • In the name of trustee, holding a fiduciary capacity.

However the transfer of title in the property may not be said to be illegal in spite prohibition in Benami prohibition act, 1988

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By Adv. Nitish Banka
Practicing Advocate District and High courts in Delhi/NCR

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