Taxability for husband paying maintenance to estranged wife

Alimony can be a one-time receipt or a periodic receipt or a combination of both. It is not specifically covered in 'income' as defined under the Income Tax Act, 1961 ('the Act') and there is no specific provision which governs its taxability.

As a general principle, a capital receipt is non-taxable while a revenue receipt is taxable. In an old Mumbai High Court ruling, it was held that monthly alimony, being a regular and periodic return from a decree, would constitute taxable income. In contrast, the lump sum payment received was held to be a capital receipt and, hence, not taxable for the former spouse. This decision was in the context of cash payments and does not deal with assets transferred as a part of the separation.

For the spouse paying the alimony, there is no provision under the tax laws enabling him to claim a deduction towards such payment from his income.