Hey @Pearl ,
There’s no specific provision under the Income Tax Act that directly addresses the taxability of alimony. But we can understand its taxability based on the frequency of the transaction and also by considering different case laws.
It can either be received as a one time settlement or on regular intervals like monthly maintenance.
Let’s understand the taxability of different kinds of settlements one by one:
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One-time lump sum settlement:
If you receive alimony as a one-time payment under a divorce or settlement agreement, it’s generally considered a capital receipt and is not taxable. You can report this amount under the schedule “Exempt Income” in your Income Tax Return (ITR).
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Recurring payments (e.g. monthly maintenance, etc.)
If you’re receiving alimony in the form of regular payments—say monthly, then these amounts are treated as taxable income. You’ll need to report it under the head “Income from Other Sources”, and it will be taxed as per your applicable slab rate.
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Transfer of assets (e.g., property or investments)
If property or other assets are transferred to you as part of the settlement, there’s no tax at the time of transfer. You can declare the value under “Exempt Income” in your ITR.
However, if you sell the asset later, you’ll be liable to pay capital gains tax, where the holding period and cost of acquisition are calculated from the date and cost when the previous owner had acquired the asset.
If you have any further questions on alimony taxation, you can post them below!