So Vidyut on Twitter came across this thing called HUF and was immediately furious. Her angry tweet is here.
I can see why she is angry. The concept of HUFs should have died long ago.
Insofar I know, no one is very clear on what exactly an HUF is and why this concept even exists. So I venture to set the record (or at least, firmly crooked).
When the British came in, they decided that as a matter of policy, they will not interfere with local customs (unless they specifically chose to interfere). The British judges were expected to settle disputes according to local customs. The 'Plan for Administration of Justice' made by Warren Hastings' Committee of Circuit in 1772 states:
"That in all suits regarding inheritance, marriage, caste and other religious usages or institutions, the law of the Koran with respect to Mahometans [Muslims], and those of the Shaster [Shastra] with respect to Gentoos [Hindus] shall be invariably be adhered to."
Hastings believed that Indians already had some clearly defined laws and customs for managing their own affairs, and it was best that they be allowed to continue with them.
But what exactly were those laws, what was the requirement of the 'Shaster'? Hastings left it to the judges to find out. Initially, the courts appointed some pandits and maulanas to help them decide as per Shaster or Koran, but realised that those folks were really advising in favour of the best bidder.
William Jones and Henry Colebrooke went about translating obscure Sanskrit texts. Colebrooke concluded that there were 2 main texts governing inheritance: one called Dayabhag, the other Mitakshara. Dayabhag was generally prevalent in regions where Brahmins relished fish and flesh, that is to say, in Bengal and Assam. Mitakshara was prevalent in rest of the country, where Brahmins vomited at the mere mention of non-vegetarian stuff.
Jones & Colebrooke assumed that these were the prevailing laws in the country, and not some useless obscure texts. In any case, they gave the British judges some clarity on how to go about settling property disputes, and the litigants some predictability on what to expect. Gaps in Dayabhag and Mitakshara were filled by judges by referring to European practices. Over time, the decisions of the courts created a body of legal precedents.
With these legal precedents filling the legislative void, Dayabhag and Mitakshara systems became the legally accepted benchmark for property ownership and inheritance. [Much later, some people claimed that these texts did not correctly capture the customs prevalent in the country, that there were other more authoritative texts. The courts refused to examine the matter. There was no point re-inventing the wheel.]
In the more common Mitakshara, the property was jointly owned by all male members of the family. A male member co-owned the property from his birth to death. The eldest male was the decision-maker, the karta (literally, the do-er).
When the taxmen knocked for revenue, they were told that the family as a whole owned the property. So, they wrote tax laws to recognise the 'family' as a taxable person, and asked it to pay taxes at the same rate as applicable to individuals. This 'family' is the HUF, a taxable person separate from the individuals forming it.
Meanwhile, the freedom movement and Independence brought along wholly novel ideas. Like Equality. Ambedkar came up with a Hindu Code Bill which proposed, among other things, that widows would have a right in deceased husband's property. There was a huge furore over it. Ambedkar thought Nehru was not pushing the Bill with all his force, and quit in 1951. It took Nehru another 5 years to get the whole thing enacted, splitting it into 4 Bills.
With these 4 laws, Nehru rescued Hindus from the gutter of traditional scriptural laws, a favour he did not extend to the minorities. The Hindu Succession Act, 1956 recognised widow's right to property. It also provided details of share of other family members in inherited property, effectively consigning big chunks of Dayabhag and Mitakshara systems to the dustbin. Half a century later, Sonia Gandhi -led NAC would push through another 4 pro-women legislation. The 2005 amendment to Hindu Succession Act gave daughters equal rights as son, thus consigning even more chunks to the dustbin.
But Dayabhag and Mitakshara did not go away completely. They survive in a whittled down form, they have a source of sustenance in the tax law, in the thing called HUF. To be more specific, they draw sustenance from the fact that HUF pays tax at the same rate as individuals.
Income Tax rates are progressive. As your income rises, your tax rate (and not just the amount) also rises. Depending on your (disclosed) income, your marginal tax rate may go up from 5% to 30% (ignoring surcharge and cess). So, if you can split your income into your individual income and family's income, you can save some tax.
Which is what many people do. Though as Lubna Kably notes, it is falling out of favour after the 2005 amendment. People are not comfortable with the idea of a married daughter demanding share in ancestral property.
So coming back to Vidyut's tweet, are HUFs a case of gender-discrimination? It surely was. But legislative interventions, coupled with some progressive rulings post-Independence, have reduced the discriminatory nature. Now, a woman can be the Karta: the head of the family, and daughters have a share in ancestral property (even after marriage). But discrimination remains. A wife, for example, cannot demand that assets in an HUF be distributed off to the members of the family.
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