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Income Tax: How much tax is levied on money received in divorce and alimony, understand alimony..

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When it comes to divorce, i.e. ending the relationship between husband and wife, India seems to be in a much better position than other countries of the world. Its rate is just 1 percent, whereas in European countries it has reached 94 percent. Still, if even 1 percent of divorces happen in India every year, then its number reaches about 1.40 crores. Alimony is also decided in divorce cases. Now the question arises whether tax has to be paid on the alimony received in divorce cases.

Alimony is the amount given by one partner to the other, which is given as alimony or compensation instead of ending the relationship. The amount of alimony can be given in lump sum or it can be paid in installments every month. The money which is given in lump sum is called capital receipt. If the alimony amount is being paid every month, then it is considered a revenue receipt.

What is the funda of income tax?
No separate provision has been made in the Income Tax Act 1961 regarding alimony. Despite this, tax is levied on the amount of alimony. Alimony tax depends on the mode through which its amount has been paid. On this basis, it is decided whether tax will be levied on the amount of alimony or not.

If alimony is received in a lump sum
If the alimony amount is paid in a lump sum after divorce, then that amount will be considered as a capital receipt and no provision of the Income Tax Act 1961 will be applied on it. This means that there will be no tax on alimony taken in lump sum and its entire amount will be outside the scope of income tax.

If alimony is given every month then…
If alimony is given every month then it will be considered as a revenue receipt. Then it will be included in the scope of income tax. In such a situation, the person receiving the alimony will have to pay tax on this amount according to his slab. However, the person who is paying this amount will not be given the right to claim a tax deduction on alimony. It is important to see that the lump sum alimony will be available only when it is given in cash.

Assets will also be taxed but…
Under Section 56(2) of Income Tax, if the husband and wife gift each other any property before the end of the marriage, then it is tax-free. The property given after divorce is kept under the scope of income tax. Similarly, if immovable property like gold-silver or security is given as alimony, then there is no tax if its value is up to Rs 50 thousand. But, if goods worth more than Rs 50 thousand are given, then the entire property comes under the purview of tax.

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