Settlement Deed from Husband

Income Tax ITR Filing
1

Property received as gift via settlement Deed from Husband and son before 4years.If wife gives property for rent whether it will be taxed in hand of wife or in hand of husband

2

If the property has been received as gift from husband, the taxability of rental income follows the clubbing provisions u/s 64 i.e, it will be taxed in the hands of Husband

But If the Property was transferred to the wife as part of settlement deed during or after a divorce the clubbing provisions typically does not apply & the rental income will be taxable solely in the hands of the wife as she is the legal owner.

3

This brings us to an interesting topic of divorce settlement taxability. I understand that if a monthly maintenance is received then it is taxable in the hands of recepient. But if one time settlement is received then it is not taxable. Your comments pls. Thanks

4

You’re absolutely correct! In India, the tax treatment for alimony or maintenance payments in divorce settlements varies based on the nature of the payment.

  1. Monthly Maintenance Payments: Regular, periodic maintenance payments received post-divorce are generally considered taxable in the hands of the recipient under “Income from Other Sources” in the Income Tax Act. The recipient must include this income in their total taxable income and pay tax accordingly.

  2. One-Time Lump Sum Settlement: A one-time, lump-sum payment received as part of the divorce settlement is generally considered a capital receipt. Since it’s not a recurring income and is viewed as a non-taxable transfer of assets or settlement of rights, it’s typically not subject to tax. However, if this payment is made in installments, there could be some grey area, but as long as it’s structured as a capital settlement and not regular income, it should remain non-taxable.

It’s also worth noting that these interpretations are based on existing judicial precedents and the specifics of each case, as well as the settlement agreement. If structured properly, a one-time settlement can indeed be received without tax implications, while regular maintenance payments are considered income.

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