I’m divorced and I have to pay. $90,000 alimony to my ex-wife. Can I claim tax exemption on alimony? Can I claim a tax exemption on this alimony? Does it matter if I pay it monthly or annually? If we come to a one-time deal, would it be tax exempt, even if the amount is much larger?
– Name withheld upon request
Alimony payments, whether made monthly, annually, or as a one-time lump sum, are considered a personal obligation and are not tax deductible to the payer. In fact, the Bombay High Court has held that even if the husband’s employer pays alimony to his ex-wife out of her salary, the entire amount of salary earned will be taxable in the hands of the husband, and the amount paid directly by the employer to the ex-wife will not be deductible from said salary income for the calculation of the tax payable.
However, if alimony is paid in the form of a transfer of capital assets rather than money, it will not be subject to capital gains tax to the payer, nor will any income generated by the asset be included in the payer’s taxable income. payer.
Alimony received monthly is taxable in the hands of the recipient. On the other hand, alimony received in a lump sum is considered a capital receipt and is therefore not subject to tax in the hands of the recipient. Similarly, if one receives a capital asset under the terms of a divorce settlement, such receipt may be considered a capital receipt and is not subject to tax.
Mahesh Nayak, Chartered Accountant, CNK & Associates.
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