The Hindu Marriage Act makes cousin marriage illegal for Hindus with the exception of marriages permitted by regional custom. Though as mentioned, marrying mother’s brother’s daughter are quite prevalent in southern parts of India. Both Hindu marriage Act and Special Marriage Act specifically disallows marriages between prohibited degrees of relationships.Maternal Cousin falls within prohibited degrees of relationship.
Section 5 of the Hindu Marriage Act bans, among other things, marriage between a brother and sister, uncle and niece, aunt and nephew, or children of brother and sister or of two brothers or of two sisters. The marriage is void, unless the custom of the community permits it.
If custom/tradition of your community supports it- Please go for it. If answer is NO then its illegal and thus wont be recognised so yes, you can marry your niece under the Hindu Marriage Act, 1955 if the customs and traditions permit you to do so.
I think it is not Beyond Prohibited Degree under Section 5(iv) of Hindu Marriage Act.
As per the Law degrees of prohibited relationship of a male :- (xii) mother’s sister, (xv) mother’s sister’s daughter, (xvi) mother’s brother’s daughter.
And prohibited degrees of a female are :- (f) mother’s brother, (k) mother’s brother’s son, (l) mother’s sister’s son.
Here in this Act, Mother’s maternal uncle’s daughter though it is the sister of mother, but as it is not full blood, then it does not fall under Prohibited Degree of Marriage.
Reference: Section 5 of the Hindu Marriage Act