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Is Alimony subject to Income Tax

Tax queries 867 views 1 replies

Rohini

Not applicable

24 Points Posted on 18 July 2010

Hi,

Is a one time lumpsum payment subject to income tax?

If the wife is receiving large sums of payments in 2 parts: One at the time of the 1st motion in the court and the 2nd at the time of the final and 2nd motion in the court ,where the amount is decided on a mutual out of court consent between the two partners: Are the amounts taxable in her income tax returns for that year??

On teh contrary,if instead of receiving monetary compensation,the wife receives a property which is in joint names between the husband and wife and the husband agrees to transfer the property solely to her name- Is that subject to income tax??

Thanks

Replies (1)

Member

Management

325 Points Posted on 18 July 2010

Re your first query, I feel that it is a capital receipt and not subject to tax. It is just a compensation awarded by the court like it does for deficiency of service in case of service providers or businesses. I have not heard of anyone being asked to pay tax on that.

Your second query is similar. Instead of cash, it is in kind and hence no tax except when some income is sought to be earned from it by way of rent or capital gains.

All these, I assume are cases where the settlement is as per court orders. On the other hand, if it is a mutual settlement without court orders, then it may be treated as gift under Sec 56. In such cases, it is better to go for these transactions before legally seperating so that the "gift" clause is not attracted.