The Joint Family as a Social Security Institution

That last point is the best closing line for an essay on this topic: the measure of the joint family as a social security institution is that when it weakened, the State had to legislate the same obligation back into existence.

The Hindu Gains of Learning Act 1930

Why it was passed

The Act is Act 30 of 1930, of 25 July 1930, and its preamble states its own purpose: it is expedient to remove doubt, and to provide an uniform rule, as to the rights of a member of a Hindu undivided family in property acquired by him by means of his learning.

The doubt was real. Where a member's education had been paid for out of the joint family funds, or where the family had maintained him while he studied, the courts had often held that his earnings belonged to the family. The reasoning was that the family had bought the skill, so the family owned its fruits. A doctor or a lawyer educated on the family's money could find his practice treated as coparcenary property.

That result had an obvious consequence. It discouraged families from educating their members, and it discouraged educated members from remaining joint.

The four sections

Section 1: short title and extent. It may be called the Hindu Gains of Learning Act 1930 and extends to the whole of India.

Section 2: definitions. Three, and each is wider than it looks.

"Learning" means education, whether elementary, technical, scientific, special or general, and training of every kind which is usually intended to enable a person to pursue any trade, industry, profession or avocation in life.

"Gains of learning" means all acquisitions of property made substantially by means of learning, whether made before or after the commencement of the Act, and whether the ordinary or the extraordinary result of such learning.

"Acquirer" means a member of a Hindu undivided family who acquires gains of learning.

Section 3: the operative rule. Notwithstanding any custom, rule or interpretation of Hindu law, no gains of learning shall be held not to be the exclusive and separate property of the acquirer merely by reason of:

(a) his learning having been imparted to him, in whole or in part, by any member of his family living or deceased, or with the aid of the joint funds of his family, or with the aid of the funds of any member; or

(b) himself or his family having been maintained or supported, wholly or in part, by the joint funds of his family, or by the funds of any member, while he was acquiring his learning.

Section 4: savings. The Act is not to be deemed to affect the terms or incidents of any transfer of property made before its commencement, the validity or consequences of anything already done before its commencement, or any right or liability created under a partition, or an agreement for a partition, of joint family property made before its commencement.

How to read section 3

The drafting is a double negative and it repays care.

The Act removes a reason; it does not create a rule. Section 3 does not say that gains of learning are always separate property. It says they shall not be held not to be separate merely by reason of the two things listed. If the property is joint for some other reason, for example because it was actually bought with joint family funds, the Act does not save it.

"Training of every kind." The definition of learning is not confined to formal education. A member trained in a craft or a trade is within the Act.

"The ordinary or the extraordinary result." A doctor's ordinary fees and an unexpected windfall from the same skill are both his.

"Substantially by means of learning." The acquisition must be substantially attributable to the learning, which is what keeps the Act from swallowing every acquisition by an educated member.

Its impact on the joint family

Stated in one sentence: the Act took the family's most valuable modern asset out of the coparcenary.

Before 1930, the earnings of an educated member could be family property, and in an economy where wealth was land that mattered little. After 1930, and increasingly as income came from salaries and professions rather than from land, the most productive members of a family held their earnings as separate property while the family estate remained a diminishing stock of ancestral land.

That is a significant part of the answer to why the joint family declined as an economic institution. The law did not abolish it; the law simply stopped feeding it.

The tax laws

MU's topic names "various tax laws", and the point is short and worth making precisely.

The Hindu Undivided Family is a separate assessable entity under the Income-tax Act 1961. It is one of the persons named in the definition of "person" in that Act. It has its own permanent account number, files its own return, and is assessed separately from its members.

The consequence is a real financial advantage. Income from the family estate is taxed in the hands of the family, at the family's own slab and with the family's own exemption limit, and is not added to the personal income of the karta or of any member. A family that keeps its property joint therefore has an additional exemption limit that a divided family does not.

Two further points are worth a line each.

Partition has to be recognised for tax purposes. The Income-tax Act contains its own provision for the assessment of a Hindu undivided family after partition, and requires a total partition to be recorded before the family ceases to be assessed as such. A partial partition is generally not recognised for this purpose. So the tax law can keep a family assessable as a unit after Hindu law has treated it as divided.

The two bodies of law pull in opposite directions. Hindu law, since 1930 and increasingly since 1956 and 2005, has been dissolving the coparcenary: gains of learning are separate, daughters are coparceners, survivorship is gone. Tax law gives a standing incentive to keep the family joint. The Hindu undivided family survives in Indian life partly because the Income-tax Act rewards it.

The tax treatment is stated here in outline. This book has not read the Income-tax Act for this subject and states no section number of it.

A worked example

An old man in a joint family becomes too ill to work. His widowed sister-in-law lives in the house. His unmarried niece is to be married. A brother dies and the funeral must be paid for. The family shop has a bad year. Compare what the joint family did about each of these with what the modern law provides.

His maintenance. The joint family maintained every member for life, out of the family estate, whether or not he could work. The modern counterpart is section 20 of the Hindu Adoptions and Maintenance Act and the Maintenance and Welfare of Parents and Senior Citizens Act 2007, both of which require a claim.

The widowed sister-in-law. The family maintained its widows, and the survival of that duty in a much reduced form is section 19 of the Hindu Adoptions and Maintenance Act, which charges the father-in-law's coparcenary property and nothing else.

The niece's marriage. A family purpose for which the karta could contract debts and even alienate property, and the reason "maintenance" in section 3(b) of that Act includes, for an unmarried daughter, the reasonable expenses of and incident to her marriage.

The funeral. Likewise a family purpose, and one of the recognised heads of legal necessity.

The bad year. The estate absorbed it, which is the risk-sharing the institution provided.

And the price? Subordination of the individual to the karta's management, and the exclusion of women from ownership, which is what the reforms of 1956 and 2005 addressed.

What took the family's best modern asset out of it? The Hindu Gains of Learning Act 1930: gains of learning are not joint merely because the family paid for the education or maintained the member while he acquired it.

And what keeps families joint now? The Income-tax Act, which treats the Hindu undivided family as a separate assessable person.

What it does NOT mean

Social security here is not a State benefit. It is a charge on the family estate, and it depends on the estate existing.

Maintenance in the joint family was not a claim. It was an incident of membership; the statutory rights that replaced it must be claimed.

The Act of 1930 does not make all earnings separate. It removes one reason for calling gains of learning joint.

"Learning" is not academic learning. It includes training of every kind usually intended to enable a person to pursue a trade, industry, profession or avocation.

"Gains of learning" is not only the ordinary result. It includes the extraordinary result as well.

The tax treatment is not a reason the institution exists. It is a reason it persists.

Quick revision

• What the joint family provided: maintenance for life; marriage expenses; care of widows and the aged; funeral and ceremonial costs; and risk-sharing, all charged on the family estate.
• The price: subordination of the individual, and the exclusion of women from ownership.
• The Hindu Gains of Learning Act 1930, four sections: gains of learning are not joint merely because the family paid for the education or maintained the member; "learning" includes education of every kind and training of every kind; "gains of learning" includes acquisitions made substantially by means of learning, ordinary or extraordinary.
• Its effect: it took the family's most valuable modern asset, professional earnings, out of the coparcenary.
• The tax laws: the Income-tax Act treats the Hindu undivided family as a separate assessable person, which gives a standing reason to remain joint.

Test yourself

1. In what ways did the joint family act as a social security institution? It maintained every member for life out of the family estate, met the marriage expenses of its members, cared for widows, the aged and the infirm, paid funeral and ceremonial expenses, and spread the risk of a bad year across the whole estate.

2. At what cost? The subordination of the individual member to the karta's management, and the exclusion of women from ownership of the family property.

3. What does the Hindu Gains of Learning Act 1930 provide? That no gains of learning shall be held to be joint family property merely by reason that the acquirer was maintained or educated by the joint family, or in whole or in part out of joint family funds, or by a member of it.

4. Why does the joint family survive as a legal institution today? Because no Act was passed abolishing it, so section 4 of the Hindu Succession Act leaves it standing; and because the Income-tax Act treats the Hindu undivided family as a separate assessable person, which gives families a continuing reason to remain joint.