Income tax treatment for alimony paid

Sales Executive

Dear Experts, I need help from you to understand the tax treatment (From Husband's point of view)for the Alimony paid in case of Divorce. I am a salaried person & We are filing for a Divorce with Mutual Consent. For Alimony, I have two choices: 1. Large Lump sum payment (E.g. 10 L)at the time of Divorce & certain Monthly payment (E.g. 10 K pm), or 2. Smaller Lump sum payment (E.g. 5 L) at the time of Divorce & higher Monthly payment (E.g. 15 K PM). Can you pls. suggest me which option would be better for me (Husband)? Do I get any Income tax Exemption for Lump Sum payment made? Do I get any Income tax Exemption for the Monthly Alimony which I will be paying to my wife? Since I will be filing for Divorce shortly, your early reply would be highly appreciated.
 
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Lawyer in Hyderabad.wats app no.9989324294

Mr.Raj,

Monthly payments treats as expenditure, which is deductable from income. Whereas lumpsum amount treats it as capital loss. which is not deductable from revenue income.Any how  court decree is required for  main evidence for such deductions.

 
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Sales Executive

Dear Mr. Chary, Thanks a lot for your reply. I really appreciate your help. Since I am a salaried person, can you pls. clarify the section under which it is deductible & is there any limit for the same? Secondly, Can I adjust the Capital Loss against Capital gain (If any) & if yes, which type of Capital gain it should be? (Short term, long term etc.) Looking forward to your early advice. Once again thanks for your response.
 
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head finance accounts & taxation

Hi Raj,

There is a concept of diversion of title at source vs application of income in income tax.

In case alimony is payable when decreed, then this merely being application of income is not tax deductible, since the income is earned by you & subsequently applied, there is no diversion of title prior to acrual of income. Even if as per the decree, an employer pays the sums directly to the estranged spouse claiming alimony under the decree it won't alter this proposition.

In case a vested right is created on the source of income itself then the taxability may be different say a income from business/asset .

As regards taxability in the hands of the recieving party please refer to this case law "Princess Maheshwari Devi of Pratapgarh v. CIT, (1984) 147 ITR 258 (Bom.)".

Kindly look out for the above emboldened sentence on the net for elaboration.

Thanks,

Hari

 
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Chartered Accountant

Originally posted by : Hari Kumar

Hi Raj,

There is a concept of diversion of title at source vs application of income in income tax.

In case alimony is payable when decreed, then this merely being application of income is not tax deductible, since the income is earned by you & subsequently applied, there is no diversion of title prior to acrual of income. Even if as per the decree, an employer pays the sums directly to the estranged spouse claiming alimony under the decree it won't alter this proposition.

In case a vested right is created on the source of income itself then the taxability may be different say a income from business/asset .

As regards taxability in the hands of the recieving party please refer to this case law "Princess Maheshwari Devi of Pratapgarh v. CIT, (1984) 147 ITR 258 (Bom.)".

Kindly look out for the above emboldened sentence on the net for elaboration.

Thanks,

Hari

Agreed.

well ansered. For salaried employee there is no section to which allows to deduct such expenses whar ever dedutions from salaries are given deducted by employer. rest of the deduction are under chapter VI-A whihc is silent on this.  Pay alimony net of tax, if allowed by court.

 
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ADVOCATE

Alimony paid is a purely personal expenditure of the payer. It is not an allowable deduction/expenditure.

 
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If in India it was possible to get some software like free turbotax to calculate your taxes and then pay it online, It would been really a great option.

 
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