6/30/13

Lump sum payment received from ex-husband against relinquishment of monthly maintenance not taxable: Tribunal - Times Of India

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Lump sum payment received from ex-husband against relinquishment of monthly maintenance not taxable: Tribunal
LUBNA KABLY, TNN Ju n 29, 2013, 01.13A M IST

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Tags: Marriage

Income-Tax Appellate Tribunal

Divorce

Alimony

MUMBAI: Marriages are made in heaven, but a divorce happens on earth and with it comes the inevitable question of alimony and its tax implications. In a recent decision the Delhi Incometax Appellate Tribunal (ITAT) has held that a lump sum payment received from a former husband, against relinquishment of monthly maintenance is a capital receipt and is not taxable.
(In a recen t deci si on th e)

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The case relates to a Delhi-based woman, who had received a lump sum of $99,000 from her ex-husband based in the United States, but had not shown the amount in her tax declaration. Based on current exchange rate this sum translates to approximately Rs. 60 lakh. Under Indian tax laws, any sum of money received by an individual without any consideration (without getting anything in return), in excess of Rs 50,000 in a year, is taxable. But if the same is received from a relative, such as a spouse, or on certain occasions such as marriage, it is exempt. The tax officer, in this case, had held that as the divorce had taken place several years ago, the Delhi-based resident was not a 'relative' and hence such payment was not exempt but taxable as 'income from other sources' in her hands. This approach adopted by the tax officer, was rejected at the first level of appeal - commissioner of income-tax (appeals). The commissioner held that the amount was paid by way of alimony only because they were husband and wife. Thus the payment received was from a relative (which includes spouse). Further it cannot be said that the lump sum amount was received without any consideration. It was received against relinquishment by the wife of her right to receive monthly alimony payments (both past arrears and future payments). Such monthly payments were provided for in the divorce agreement. Hearing an appeal filed by the tax officer, the Delhi ITAT upheld the order of the CIT (appeals). It observed that: "In this case, the taxpayer was to receive monthly alimony which was to be taxable in each year. As such monthly payments were not received they were not offered for tax as income. The lump sum received by the woman was a consideration for

IN-DEPT H COVERAGE Alimony

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Lump sum payment received from ex-husband against relinquishment of monthly maintenance not taxable: Tribunal - Times Of India

relinquishing all past and future claims." It was a non-taxable capital receipt not liable to tax, concluded the ITAT. "Tax on alimony payment cannot be avoided by merely taking a lump sum consideration. Various facts such as the period of time the monthly alimony was not received, action taken for receipt of such alimony, and the fact pattern of the final settlement by way of lump sum payment will determine whether it will be treated as non-taxable," cautions a civil advocate, attached to the Mumbai high court.
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Lump sum payment received from ex-husband against relinquishment of monthly maintenance not taxable: Tribunal - Times Of India
Readers' opinions (159)
Sort by: Newest | Oldest MIL (bangalore) 30 Jun, 2013 09:26 AM The laws in India are always tilted towards women why is the alimony not taxable when the wife is only enjoying the hard earned and taxrd money of the husband without any duties and responsibilities. Mens Rights Movement (N Delhi) 29 Jun, 2013 11:23 PM This ruling will promote divorce industry. Beneficial taxation system has always promoted industry... good one for such promotion. When other industry are not growing, let at least one industry grow. Adarsh Gupta (Hyderabad) 29 Jun, 2013 08:45 PM Leave the spouse, but not his spice! Mens Rights Movement (N Delhi) replies to Adarsh Gupta 29 Jun, 2013 11:16 PM The man is bad, divorce him. His money is good, his house is good, his child support is good, alimony is good. kalyan () 29 Jun, 2013 08:18 PM Now divorce would prove to be a profitable business for wives. Get married and then get divorced, then again marriage and again divorce... and so on, and within a few years they will become multimillionaires! Easiest way to become super rich... :) harbhajan (usa) 29 Jun, 2013 06:44 PM I am relieved, no more nonsense or be henpecked. God saved me with a price tag!! READ ALL COMMENTS

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