Holding property in a relative's or employee's name has been ordinary practice in Pakistan for generations — to keep a transaction quiet, to avoid a limit, to simplify a transfer, or for reasons long forgotten.

Since the Benami Transactions (Prohibition) Act 2017 it is prohibited, and the consequences include confiscation of the property.

What a benami transaction is

In substance: a transaction where property is transferred to, or held by, one person while the consideration has been paid by another, and the property is held for the benefit of the person who paid.

The vocabulary matters:

  • The benamidar is the person in whose name it stands
  • The beneficial owner is the person who paid and for whom it is held
  • The benami property is the subject matter — and it is not limited to land. It covers movable and immovable property, tangible and intangible, including bank accounts, shares and vehicles

Also caught: property held in a fictitious name, and property whose owner denies knowledge of it or cannot account for the source of the consideration — which is why "the property is in my driver's name" arrangements are so exposed.

The exceptions

Not every holding in another's name is benami. The Act carves out, in substance:

  • Property held by a karta or member of a Hindu undivided family for the family, from known sources
  • Property held in a fiduciary capacity — a trustee, executor, partner, director, or a depository or agent — for the person to whom he is a trustee or towards whom he stands in a fiduciary capacity
  • Property held in the name of a spouse or child, where the consideration is paid from known sources of the person providing it
  • Property held jointly with a brother, sister or lineal ascendant or descendant, where both names appear and the consideration comes from known sources

Two features run through every exception: the relationship, and known sources of funds. A purchase in a wife's or child's name funded from documented, taxed income is not the target. A purchase in a nephew's name funded from cash nobody can account for is.

The consequences

Confiscation. Benami property is liable to be confiscated by the Federal Government, without compensation. This is the central risk, and it is the reason the Act changed behaviour.

Prosecution. Entering into a benami transaction is an offence, with imprisonment and fine, applying to the beneficial owner, the benamidar and any person who abets.

No recovery through the courts. The Act bars a suit or claim to enforce a benami holding — meaning the beneficial owner cannot sue the benamidar to recover the property. That protection, which under the older law existed in limited form, is gone.

That last point deserves emphasis, because it inverts the risk people assume.

The trap most families do not see

The arrangement works perfectly until it does not.

Property is bought in a brother's name. Years later the brother refuses to transfer it, sells it, mortgages it, dies leaving it to his heirs, or his creditors attach it. Historically the person who paid could bring a suit and prove the arrangement.

Now the claim is barred, and pursuing it means asserting on the record that the transaction was benami — which invites confiscation and prosecution against the person asserting it.

That is the real position, and clients are entitled to hear it plainly rather than be encouraged into a claim that cannot be brought. It is also why we so strongly advise overseas clients to buy in their own names. See property scams against overseas Pakistanis and buying property as a non-resident.

Proceedings, and how they usually start

Cases typically begin with an information or an inquiry by the initiating authority, often triggered by a tax examination — an asset that does not match a declared income, an unexplained transfer, or a mismatch between a property record and a return.

The process runs through notice to the benamidar and the beneficial owner, an opportunity to be heard, provisional attachment, reference to and adjudication by the Adjudicating Authority, and confiscation, with an appeal route to the Appellate Tribunal and onward.

The controlling question throughout is the source of the consideration. Cases are won by documenting it and lost by asserting it. Bank trails, declared income, remittances through banking channels, and consistency with tax returns are the evidence.

See FBR audit notices and transfer pricing and related-party transactions.

Overlap with other regimes

Money laundering. Concealment of ownership and unexplained assets engage the AML framework, and financial institutions report accordingly. See AML compliance for smaller businesses and a frozen bank account.

Corporate. Shares held by nominees for undisclosed owners raise beneficial ownership disclosure obligations under the company law framework. If you hold shares "for" someone, or someone holds shares for you, document the fiduciary basis properly. See directors' duties and personal liability.

Inheritance. On a death, a benami arrangement becomes a dispute between two sets of heirs — those of the benamidar and those of the person who paid. See who inherits what and transferring property after a death.

Registration and stamp duty. Understating consideration to reduce duty compounds the problem, because the recorded price becomes the price you can prove. See stamp duty and registration.

If you have an old arrangement

Do not assume it is safe because it is old, or because everyone involved is family and on good terms. Circumstances change: people die, marry, fall out, or become insolvent.

Take advice on the specific facts before doing anything — including before attempting to "regularise" it by a transfer, which is itself a transaction with consequences. The right course depends on whether the holding falls within an exception, whether the source of funds is documentable, and what the tax position is.

What is clear is that the worst option is to leave an undocumented arrangement in place and hope it is never examined.

How the firm can help

We advise on whether a holding falls within the statutory exceptions, document genuine fiduciary and family arrangements properly, respond to notices from the initiating and adjudicating authorities, contest attachment and confiscation, and appeal to the Tribunal.

For buyers and investors, we structure acquisitions so ownership and the source of funds are clean and documented from the outset — which costs a fraction of defending the alternative.

See property and real estate, or contact the firm.