Is there a tax on the support you pay or receive? Here is the answer

Divorces are emotionally and financially stressful experiences. Not only do they involve an investment of time, energy and emotions, but they also have significant financial implications. In India, alimony is a crucial aspect of the divorce process and it is important to understand how it is calculated and whether it is taxable.

What is alimony?

Alimony is the financial assistance provided to a spouse after a divorce to assist with their maintenance, support, or livelihood. If one spouse does not have the means to adequately support themselves after the divorce, the law usually requires the other partner to pay maintenance.

Who is entitled to maintenance?

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Under Section 25 of the Hindu Marriage Act, the court may grant permanent maintenance to the wife or husband for their maintenance and upkeep. If the wife works, but there is a significant difference in income between her and her spouse, she receives alimony to maintain a similar standard of living. If the wife has no income, the court takes into account factors such as her age, education and earning capacity and determines the amount of maintenance. In cases where the husband is unable to work and is unable to earn money while the wife is working, he may be awarded maintenance.

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  • Maintenance can be either a one-time lump sum payment or a monthly installment. Under the Income Tax Act 1961, maintenance is not classified as income. It is usually granted to the non-earning spouse by the working spouse after the legal dissolution of the marriage.

    The taxation of maintenance depends on the method of payment. If the lump sum payment is made after the divorce, it is considered a capital inflow and is tax-free. If paid in monthly installments, it is considered a source of income and is taxable. The recipient of alimony is obliged to pay tax on the amount received in accordance with his income. It is important that the person paying maintenance cannot claim a tax deduction for the maintenance paid.

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    first published: September 13, 2023, 6:51 PM IST

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