[Editorial Analysis] How changes in family law can improve household finance

Mains Paper 1: Society

Prelims level: HUF

Mains level: Describe the influences of the family law amendments

Context

• Indian households’ financial arrangements are unique in the international context.

Highlights the finance report published by the RBI

• As the Reserve Bank of India’s (RBI) committee on household finance report highlights, many aspects of these financial arrangements can be altered in a manner that is beneficial to households.

• Indian households have substantial investments in real estate—85% of total assets, on average, which barely declines even as households become wealthier.

• Most Indian households do little apparent saving for retirement and investment in insurance is woefully low relative to their counterparts in advanced economies.

• These issues significantly affect household well-being.

• The report notes that Indian households potentially stand to increase their annual real income growth by up to 10% by making a set of sensible changes to their financial arrangements.

The law commission recommendations on family law

• The Law Commission of India released a consultation paper on 31 August 2018, recommending a set of reforms to family law.

• The key recommendations include

• (i) a woman should, regardless of whether she contributes financially or monetarily to the family income, be entitled to an equal share in marriage property;

• (ii) abolition of the notion of coparcenary at the central level, thus extinguishing the right to property by sheer circumstance of birth; and

• (iii) abolition of the Hindu Undivided Family (HUF) structure.

Implications of these changes

• To unpack these changes and their implications for household finance, a little further explanation is warranted. Under Hindu law, there is currently the notion of a coparcenary.

• Coparceners to an ancestral property acquire rights in it upon birth.

• The share of a coparcener is affected by births in the family, which reduce the available share to each coparcener, and deaths, which increase coparceners’ share.

• Coparcenary comes into effect immediately upon the birth of anyone with such claims, meaning that the property acquires the nature of an ancestral property.

• Turning back to implications for household finance, consider the fact that coparceners have the right to demand partition of an ancestral property.

• However, in practice, there are often long delays arising from the need to secure agreement between coparceners to dispose of ancestral property.

• There may also be significant judicial delays in the case that conflicts between them require court resolution.

Why is this important?

• The life chances of individuals in a society are very different depending on their level of wealth.

• However small, can sometimes mean the difference between financial security and destitution

• If men’s claims to ancestral wealth supersede those of women, society consigns women to an inherently inferior financial position.

• As the Law Commission’s consultation paper points out, both Hindu and Muslim law need reform to make inheritance truly gender-neutral.

• One particular area of concern is that numerous issues with the current legal framework make the financial position of widows and unmarried daughters especially fragile.

• Reforms in this area have thus far been piecemeal and more work is needed until the financial treatment of men and women is truly equal in law.

Conclusion

• Reforming laws is not, of course, the only avenue towards better household financial arrangements, but it is an important one.

• In addition to the other concerns potentially addressed by adopting the reforms proposed in the Law Commission’s report.

• It is likely that we will see significant improvement in household finance.

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Prelims Questions:

Q.1) Consider the following about the provisions for the differently abled persons in India.

1. The constitution places a duty on the state to provide a lawyer to any citizen who is unable to engage on due to disability.

2. No disabled person can be compelled to pay any taxes for the promotion and maintenance of any particular religion.

3. Legally, physical disability disentitles a person from inheriting ancestral property.

4. Tax laws provide for tax liability deduction in respect of the expenditure incurred on the medical treatment of handicapped dependants.

Select the correct answer using the codes below.

a) 2 and 3 only

b) 1, 2 and 4 only

c) 3 and 4 only

d) 1, 2, 3 and 4

Correct Answer: B

Mains Questions:

Q.1) How changes in family law can improve household finance?

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