Is There Any Tax On Alimony You Are Paying Or Receiving? Here’s The Answer – News18

Divorces are emotionally and financially draining experiences. They involve not just the investment of time, energy, and emotions but also significant financial implications. In India, one crucial aspect of divorce proceedings is alimony, and understanding how it’s calculated and whether it’s taxable is essential.

What is Alimony?

Alimony refers to the financial support provided to a spouse after a divorce to help them with their maintenance, support, or sustenance. Typically, if one spouse lacks the means to support themselves adequately after divorce, the law mandates that the other partner provides alimony.

Who is Eligible for Alimony?

Under Section 25 of the Hindu Marriage Act, the court can grant permanent alimony to either the wife or husband for their support and maintenance. If the wife is employed but there’s a substantial income gap between her and her spouse, she will get alimony to maintain a similar standard of living. If the wife doesn’t have an income, the court considers factors like her age, education and ability to earn and determines the alimony amount. In cases where the husband is disabled and unable to earn while the wife is earning, he may be awarded alimony.

Alimony can be either a one-time lump sum payment or a monthly instalment. According to the Income Tax Act of 1961, alimony isn’t classified as income. It’s typically granted to the non-earning spouse by the earning spouse after the legal dissolution of marriage.

The taxation of alimony depends on the payment method. If it’s paid as a lump sum after the divorce, it’s considered a capital receipt and is tax-free. If it’s paid in monthly instalments, it’s categorized as a revenue receipt and becomes taxable. The recipient of alimony is required to pay tax on the received amount based on their income slab. Importantly, the payer of alimony cannot claim a tax deduction for the alimony paid.