Alimony provides financial support in divorce cases, but its tax-related aspects have always been complex. Questions often arise about how alimony is taxed in India. Is there a difference between lump sum payments and monthly installments? Is tax applicable on alimony received in the form of property? This article will help you answer all these questions.

According to Chartered Accountant Dr. Suresh Surana, the tax status on alimony under the Income Tax Act, 1961 in India is unclear. Its determination depends on the type of alimony and the nature of its payment.

Tax on alimony in cash

Lump sum payment is considered a Capital Receipt, which is not taxable. In the Delhi High Court case (ACIT vs Meenakshi Khanna), it was said that lump sum alimony received in exchange for giving up the right to monthly payments under the divorce agreement will not be taxed.

Monthly installments
Alimony paid in regular monthly installments is considered a revenue receipt. It will be taxable as “income from other sources”.

Tax on alimony as property
Transfer of assets before divorce is taxable. It is considered a gift between the spouses and is tax-free under Section 56(2)(x) of the Income Tax Act.

Transfer of property after divorce
After divorce, the gift relationship ends. If the property is transferred under a court order or formal agreement, it will not be considered a gift, and Section 56(2)(x) will not apply. Dr Surana explains that alimony payments cannot be shown as a deduction in taxable income. This is a contentious issue, as the Income Tax Act lacks clarity

Disclaimer: This content has been sourced and edited from News 18 hindi. While we have made modifications for clarity and presentation, the original content belongs to its respective authors and website. We do not claim ownership of the content.