com
HEMANT SINDHWANI
ACA, ACMA, CS
Marriages are made in heaven, but a divorce happens on earth and with it comes the inevitable question
of alimony and its tax implications
Now days, there is increasing trends in number of divorce in India. In many cases, there is only one
spouse who is earning and spouse who is not earning need maintenance from other one. This amount is
known as Alimony.
In Hindu Marriage Act, 1955 Section 25 defines the Permeant Alimony and maintenance.
Alimony may be fixed amount or periodical sum for a fixed period or for whole life. Alimony is does not
include the payment made for child Support. The payments cannot be contingent on the status of a child.
This is to prevent child support from being disguised as deductible alimony. Alimony may be monetary
consideration or share in Immovable property.
As per Income Tax Act, Section 2(24) defines the Income, which has not specifically cover Alimony as
Income and there is no specific provision which govern its taxability. But at the same time this definition
is an inclusive definition and hence whatever can fall under natural meaning of the word 'Income' is
covered under this definition.
However, there is general principal of Income Tax that only Revenue Receipt is taxable,
capital receipt is not taxable unless otherwise specifically taxed by the law.
When during the course of continuance of marriage the husband gives money to his wife for the upkeep
and maintenance of his family including her, the same is called as PIN Money and not regarded as her
income, as by the customary laws, the earning husband is duty bound to maintain his family.
Payment of alimony arises out of the same duty recognized by various statutes; the only difference being
that in this case the marriage does not subsist.
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However, after divorce (when relation of spouse ceased to exist), any asset transferred to the former
spouse without consideration, would be treated as a gift from stranger/non relative/friend (whatever
the name may be) and would be taxable in the hand of recipient.
In case of transfer of assets other than immovable properties (such as securities, jewelry, etc.), if the
asset's fair market value is more than Rs. 50,000, the entire value at the time of transfer will be taxable
for the recipient. Where such an asset is received for some consideration lower than the fair value by
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more than Rs. 50,000, the difference is taxable. In case of transfer of an immovable property, if its stamp
duty value is more than Rs. 50,000, the entire value will be taxable for the recipient. Rules have been
prescribed to arrive at such values.
Any income from the assets gifted after divorce would not be clubbed with the income of transferor
spouse as relationship of spouse ceased to exist. After divorce, any income from these assets would be
taxable in the hands of the recipient spouse.
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