Alimony In India: Tax Rules, How It Works, And How Courts Decide The Amount

Alimony, also known as maintenance, is financial support provided by one spouse to the other during or after divorce or separation. Its primary purpose is to help the financially weaker spouse maintain a reasonable standard of living post-separation.

A recent high-profile case is the divorce of cricketer Yuzvendra Chahal and choreographer Dhanashree Verma. The Mumbai family court finalised their separation on Thursday, with reports suggesting that Mr Chahal paid an alimony of Rs 4.75 crore.

Here's everything you need to know about the tax implications of alimony in India.

Is Alimony Taxable In India?

In India, the taxability of alimony hinges on the nature of the payment

• Lump-Sum Alimony: When alimony is paid as a one-time lump sum, it is considered a capital receipt and is not taxable in the hands of the recipient.
• Periodic Alimony: Alimony received as regular, recurring payments (e.g., monthly or annually) is treated as income and is taxable for the recipient under the head 'Income from Other Sources.'

For The Payer

Regardless of the payment method - lump sum or periodic - alimony payments are considered personal expenses and are not tax-deductible for the payer.

Transfer Of Assets

If alimony is provided through the transfer of assets:

• Before Divorce: Transfers without consideration before divorce are generally exempt from tax, as they are treated as gifts from relatives under Section 56(ii) of the Income Tax Act, 1961.
• After Divorce: Post-divorce, such transfers are no longer considered gifts from relatives and may be taxable in the hands of the recipient if their value exceeds Rs 50,000.

How Alimony Amount Is Determined

• Income and Financial Status: According to advocate JS Rohilla, a civil and criminal lawyer in Indore, the court examines the earnings, assets, and liabilities of both spouses to gauge their financial standing. This includes salaries, business profits, real estate holdings, savings, and investments. Disparities in earning capacities are also considered.
• Standard of Living: The goal is to help the dependent spouse maintain a lifestyle similar to what they had during the marriage.
• Duration of Marriage: Longer marriages often result in higher or longer-term alimony since financial dependence is usually greater in such cases. Shorter marriages may lead to lower or shorter-term payments.
• Age and Health: Younger and healthier individuals are expected to be self-sufficient, while older or unwell spouses may receive higher alimony due to limited earning capacity.
• Child Custody and Dependents: If the dependent spouse has custody of children, alimony may be higher to cover childcare expenses and maintain their standard of living.
• Contributions to the Marriage: The court considers both financial and non-financial contributions, such as homemaking, childcare, and supporting the other spouse's career.
• Conduct of the Parties: In cases of misconduct (like cruelty, adultery, or desertion), the court may adjust alimony accordingly. In no-fault divorces, financial factors take priority.
• Assets and Liabilities: The financial burden of loans or debts on both spouses is considered before finalising the amount.

Legal Framework

Several legal provisions guide alimony determinations in India.

• Hindu Marriage Act, 1955: Sections 24 and 25 address interim and permanent maintenance for Hindus, Jains, Sikhs, and Buddhists.
• Special Marriage Act, 1954: Sections 36 and 37 provide for maintenance in inter-religious marriages.
• Criminal Procedure Code (CrPC) - Section 125: Offers a legal recourse for spouses unable to maintain themselves, irrespective of religion.

Can A Husband Receive Alimony In India?

A husband can receive alimony in India if he is financially dependent and the wife has a stable income.

Courts have ruled in favour of the husband before, like in the landmark case of Deepak vs Anita (2012), where financial dependency was a key factor.

Can Alimony Be Stopped?

Alimony can be stopped under certain conditions, but only with court approval. If the recipient spouse remarries, they may no longer be eligible for support. If the paying spouse loses their job or faces financial hardship, they can request the court to modify or stop the payments.