I'm a divorcee, will my alimony amount be taxable?

I'm a divorcee and going to receive alimony from my ex-husband. Is this amount taxable?

- Shalini

The Income Tax Act classifies income into two categories - 'revenue receipts' and 'capital receipts'. Generally, revenue receipts are taxable income and are subject to certain deductions/exemptions, whereas capital receipts are non taxable.

When a divorcee receives alimony from estranged spouse, it constitutes as a part of capital receipt. Considering, that you are receiving a lumpsum amount, it will fall under capital receipt, hence you will not have to pay any tax on it. This is because the amount received is not in exchange of any services offered towards any business, vocation or employment. Therefore, the amount that you would receive as alimony would tax free.

However, note that if the alimony is received on a monthly basis, it will be treated as revenue receipt and hence it will be taxable. In such a case, the law interpreted here is that a one time lumpsum amount received will be treated as capital receipt and monthly amount (considered as income) as capital receipt.

In my view, with due respect to the High Court, alimony should not be taxable.

Smart tip: If the amount is large, it might attract scrutiny form the Income Tax Department. So, it is advisable to keep your legal documents in place that supports your amount as alimony.

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