Section 3 of PBPT Act : Section 3: Prohibition Of Benami Transactions

Explanation using Example

Imagine a scenario where Mr. Sharma, a businessman, buys a piece of land but instead of registering the property in his name, he registers it under the name of his domestic helper, Mr. Singh, without Mr. Singh providing any payment for the property. Mr. Sharma does this to evade taxes and to keep the property out of his financial records for any scrutiny. This is a benami transaction.

Under Section 3 of The Prohibition of Benami Property Transactions Act, 1988, this transaction is illegal. If caught, Mr. Sharma could face imprisonment for up to three years, a fine, or both, according to the Act. Moreover, if this transaction took place after the 2016 amendment, the punishment would be as per the stricter provisions outlined in Chapter VII of the Act.