The definition of “Relative” is contained in various legislations like Income Tax Act, Companies Act, SEBI regulations, Indian Stamp Act to name a few.

The length and breadth of coverage is sweeping and has expanded overtime.

It has now reached a stage where the person concerned has to go around and discover who and where the so called “relative”is.

The purpose of these definitions is to track transactions with relatives to ensure there is no misuse of concessions or resorting to any undue advantage of any sort.

For example the definition of “relative” under the Income tax Act is wide enough to cover lineal ascendant and descendant of the person.

If a person makes a gift to a “relative” it is exempt from income tax up to a limit.

The definition of “relative” in the SEBI regulations draws support from the definition under the Companies Act which is also wide.

Directors on Boards are nervous of some obscure relative with whom he is not in touch undertaking a trading transaction during the prohibited window period.

The Stamp Act has a definition of “family “ instead of “Relative” where concessional stamp duty is applicable.

There are reported misuses in this area.

Dwindling relationships

With the steady disintegration of the joint family system over the years the connect with family members both immediate and remote has virtually gone.

While each one pursuing their own career and going abroad may be a factor but it is not a convincing enough reason.

Generational shift in thinking and approach and in some cases ideological differences coupled with ego clashes have had a devastating effect resulting in breakdown of relationships among relatives of families.

In family businesses the need to stay together is dictated by a limited agenda of protecting the entity and the resources as also the positions attached to it.

Sometimes when these relatives meet in public functions, the underlying tensions in their relationships are barely concealed.

Biz family rifts

History is loaded with reported cases of family disputes like — Birlas, Ambanis, Singhanias, Hindujas, Godrej and in the recent past Kirloskars, Lodha brothers and so on.

The list is only illustrative and endless.

These differences driven primarily on account of clashes among relatives demonstrate that beyond three generations it is difficult to keep family members together in continuing the business and hence the business split happens and along with it almost a permanent breakdown of relationships.

In some cases it could be the other way around.

What next?

Should there be a mass movement to ignite the spirit of togetherness among family members if not for anything else but at least to preserve the sanctity of the definition of “relative” in various regulations?

It would require a Herculean effort to make this happen.

Tweaking regulations

While this long-term goal which is now a dream can be converted into reality through a sustained effort, the relatively easier option would be for the regulations should first prune down the list in the definition of “relative “ to reflect the realities on the ground.

Alongside this there must be an attempt to standardise the definition of “relative” across regulations to achieve uniformity in approach.

The writer is a chartered accountant

Published on March 4, 2025