I am divorced and should pay ₹90,000 alimony to my ex-wife. Can I declare tax exemption on the alimony? Can I declare a tax exemption on this alimony? Does it matter if I pay it month-to-month or yearly? If we agree on a one-time settlement, would that be tax-exempt, even when the quantity is far larger?
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Alimony funds, whether or not made month-to-month, yearly, or as a one-time lump sum, are thought of a private obligation and should not tax-deductible for the payer. In reality, the Bombay Excessive Court docket has held that even when the alimony is paid by the husband’s employer out of his wage to his former spouse, the whole quantity of wage earned shall be taxed within the palms of the husband, and the quantity paid immediately by the employer to the previous spouse is not going to be deductible from such wage revenue for computing the tax payable.
Nonetheless, if alimony is paid within the type of a capital asset switch as an alternative of cash, it received’t be topic to capital good points tax for the payer, nor will any revenue generated by the asset be clubbed with the payer’s taxable revenue.
Alimony acquired on a month-to-month foundation is taxable within the palms of the recipient. Then again, lump-sum alimony acquired is taken into account as a capital receipt and due to this fact, not taxable within the palms of the recipient. Equally, if one receives capital asset underneath the phrases of a divorce settlement, one might be able to take a view that such receipt is a capital receipt and isn’t taxable.
Mahesh Nayak, chartered accountant, CNK & Associates.
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