[Opinion] Benami Act – Retrospective vs. Prospective Debate

CA Vaishali More – [2025] 175 taxmann.com 476 (Article)

1. Introduction

The concept of benami transactions has been a significant concern in India, primarily due to its implications for tax evasion, money laundering, and corruption. The term “Benami“, derived from Urdu/Persian, means “without name” or “no name.” It refers to a transaction where a property is acquired in the name of one person, while the payment is made by another. The practice of benami transactions has existed in India for centuries, primarily as a means to evade taxes, launder money, and conceal wealth. During the British era, such transactions were legally recognised by courts. However, after independence, growing concerns over black money and financial opacity led to demands for stricter regulation.

The Benami Transactions (Prohibition) Act, 1988 was India’s first attempt to curb benami transactions where property is purchased in one person’s name but paid for by another to hide true ownership. Although it declared such transactions illegal and allowed for confiscation of benami property, the Act lacked enforcement mechanisms, penalties, and rules, rendering it largely ineffective.

To strengthen the law, the Benami Transactions (Prohibition) Bill, 2011 was introduced but lapsed with the dissolution of the 15th Lok Sabha. A revised Benami Transactions (Prohibition) Amendment Bill was introduced on 13th May 2015, proposing several changes, including renaming the Act as the “Prohibition of Benami Property Transactions Act, 1988” (PBPT Act).

In 2016, the Government of India significantly strengthened the Benami Transactions (Prohibition) Act, 1988 through comprehensive amendments. The 2015 Amendment Bill, which came into effect in 2016, overhauled the original law now renamed the Prohibition of Benami Property Transactions Act, 1988 (as amended). It introduced a clearer definition of benami transactions, established dedicated authorities for investigation and adjudication, and prescribed stringent penalties, including imprisonment of up to 7 years and hefty fines. These reforms transformed the Act into an effective tool against black money and corruption.

2. Amendment v. Enact – A Strategic Approach

When the original Act has been extensively amended and enlarged from 9 section to 72 sections, why a new legislation was not enacted? The legislative department’s decision to amend the existing law rather than repeal it was a strategic and intelligent move. Instead of enacting an entirely new law, the government strengthened the Benami Transactions (Prohibition) Act, 1988 through the 2016 amendment, transforming it from a weak and ineffective statute into a powerful enforcement tool.

The Finance Minister while answering to the debate on the Amendments Bill in Lok Sabha on 27th July 206 replied as follows:

“Sir, the principal object behind this Bill is that a lot of people who have unaccounted money invest and buy immovable property in the name of some other person or a non-existent person or a fictitious person or a Benami person. So, these transactions are to be discouraged.”

The decision to amend the law rather than replace it was driven by several practical and legal considerations such as:

• The primary objective of the 1988 Act, to prohibit benami transactions, remained unchanged.
• Amending the existing Act preserved the validity of all ongoing cases, past transactions, and legal precedents.
• Enacting a new law would have required significant time for drafting, approvals, and parliamentary debate.
• Repealing the old law and replacing it with a new one could have led to legal disputes over the applicability of past benami transactions.
• By opting for amendments, the government could immediately enhance enforcement without unnecessary procedural delays.
• The amendments allowed the addition of enforcement mechanisms, clearer definitions, and stricter penalties, without the need for an entirely new framework.

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