Laws In India: Personal Laws and Legal Aspects of Financial Regulation and Compliance

In India, there are various laws and regulations governing different aspects of an individual’s life. The personal laws and financial regulatory acts impact an individual’s personal and economic affairs. Thus, it becomes essential to have knowledge of these laws to manage one’s finances effectively. Let’s find out what are personal laws, financial regulations, and compliances and how they affect an individual’s life.

Personal Laws in India

The major personal laws in India are the marriage, inheritance and adoption laws.

Marriage Laws: In India, individuals belong to various cultures and communities. Each community has its own marriage act. However, most of the communities in India are covered under the Indian Marriage Act, Indian Christian Marriage Act, Muslim personal laws, and Hindu Marriage Act. The Marriage Acts regulate the legality of marriages and divorce proceedings in India. 

Inheritance Laws: Inheritance Laws are very important for an individual. In India, inheritance and succession laws regulate the distribution of assets of a person after his/her death. Different communities in India are governed by their respective inheritance laws, such as the Hindu Succession Act, Indian Succession Act and Muslim personal laws.

Adoption Laws: In India, individuals wishing to adopt a child can do so only in compliance with the adoption laws. The Hindu Adoption and Maintenance Act and Guardians and Wards Act regulate the adoption procedures, provide the responsibility of adoptive parents towards the child and grant rights to the adoptive child. 

How do Personal Laws Impact an Individual’s Life?

The personal laws not only affect an individual’s personal life but also the financial life. Here is how it impacts the personal finances of an individual:

• Marriage laws regulate divorces. When a couple undergoes a divorce, it will affect the financial position of the couple. Assets are distributed between the couple, depending on the money they have contributed towards the asset. These assets include property, investments, and debts acquired during the marriage.
• In many instances, the spouse is the nominee for bank deposits, post office deposits, life insurance, investments in equity markets, and mutual funds. In case of a divorce, the nominee must be changed apart from the asset distribution. 
• There may be joint accounts held by the husband and wife where they have invested money or made transactions. There may also be joint demat accounts to make investments. After a divorce, the joint account must be closed, and the amount in the account must be divided according to the investments and transactions made by each spouse. In such a case, spouses should recalculate their personal finances.
• An individual may also have to pay maintenance or alimony to the spouse during or after divorce. If the divorced couple has a child, a spouse might also have to pay for the maintenance of the child, which impacts the financial position of the individual.
• The inheritance and succession laws govern the distribution of assets amongst heirs, granting the spouse and children a right on the deceased person’s estate. This changes the financial position and wealth accumulation of the spouse and children. In such cases, individuals may have to pay taxes on the inherited property, such as property tax, and clear the debts of the property. 
• In some cases, where the inherited property is sold, individuals may have to make more investments to save capital gain tax and avoid tax implications from the inherited assets.
• If there are disputes over property rights and ownership, they must be settled legally as per inheritance laws. It can have financial consequences on an individual, affecting his/her wealth, investments and financial security.
• When an individual inherits property or assets, it may also impact tax liabilities and financial strategies, including estate and succession planning.

Financial Regulations in India

Finance regulation and compliance encompasses regulations related to banking, investment, consumer protection, and governance. They ensure fairness and accountability in financial transactions to protect the interests of investors. The financial regulation and compliance laws include the provisions of the Banking Regulation Act, Negotiable Instruments Act, Consumer Protection Act, Foreign Exchange Management Act, Information Technology Act, Reserve Bank of India regulations, etc. 

Finance-related acts regulate the payments and transactions made by a person through financial institutions. They regulate and protect an individual’s financial payments and transactions, nominees for bank deposits, cheque payments, NRI accounts, foreign payments, cyber crimes, etc. They also provide legal modes of resolving disputes relating to a person’s financial transactions.

How do Financial Laws Impact an Individual’s Life?

The finance-related laws affect an individual’s personal finances in the following ways:

• They ensure the safety of an individual’s deposits and investments with banks.
• They provide and safeguard an individual’s investments and returns on deposits and savings accounts made with a bank.
• They provide loans or debt restructuring for individuals to help them settle their debts.
• Individuals can approach an ombudsman to resolve banking transaction complaints, ensuring the safety of their money.
• They provide rules for the dishonour of cheques and the cheque clearance process.
• They safeguard online transactions and payments made through UPI apps and cards.

When a personal event occurs in an individual’s life, such as marriage, divorce, or death, it affects the individual’s personal finances in accordance with personal laws. Finance-related laws not only protect an individual’s finances but also prescribe the legal modes of conducting transactions. They shape the financial landscape in which individuals operate, impacting their savings, investments, borrowings, and protecting their assets. Thus, it is essential for an individual to know the personal laws and financial laws in India.