One time alimony in divorce

Well, Mr Goenka,

I do hope the question of alimony-taxation does notconcern you any way other than academic! ;)Methinks alimony received by the wife consequent to her divorce fromher husband will be taxable in her hands if it exceeds Rs 50000 u/s56(2)(vi). Whether or not the amount to be taxed constitutes expensein the payer's hands is no criteria for determining if it willconstitute income in the recipient's hands. One person's income isnot necessarily another person's expense.I was combing the web to stumble upon a case law on this and guesswhere I landed up? The Indo-US Double Taxation Avoidance Treaty!Here is what Clause 1 and 5 of Article 20 of that DTAA says:[ARTICLE 20 - Private pensions, annuities, alimony and childsupport - 1. Any pension, other than a pension referred to inArticle 19 (Remuneration and Pensions in respect of GovernmentService), or any annuity derived by a resident of a ContractingState from sources within the other Contracting State may be taxedonly in the first-mentioned Contracting State.][.....]5. Alimony paid to a resident of a Contracting State shall betaxable only in that State. The term "alimony" as used in thisparagraph means periodic payments made pursuant to a writtenseparation agreement or a decree of divorce, separate maintenance,or compulsory support, which payments are taxable to the recipientunder the laws of the State of which he is a resident.]Though the above does not establish that alimony received by a womanin India is taxable in her hands, the way the word "alimony" hasbeen thrown about in the Agreement and the fact that there's aseparate Article in the DTAA dealing with it, means taxation ofalimony receipts is not completely out of the question.I don't see how alimony can escape Section 56(2)(vi)—it does notfall within any of the exceptions mentioned therein. The personmaking the alimony is no longer the woman's spouse. But alimony mayalso become payable where the couple are separated but not divorced.In that event, nothing would be taxable in the wife's hands u/s 56since she gets that money in her capacity as a wife. Also, maybe ifthe alimony is in the shape of an annuity i.e. monthly or otherperiodical maintenance allowance, and the total payment during theyear does not exceed Rs 50000, it could be claimed exempt u/s 56.Happy Married Life to everyone!

CA Sanjeev Bedi

--- In ICAI_CIRC_MEERUT_CA@yahoogroups.com, PRAMOD GOENKA wrote:>>> Dear Mr. Deepak>> I do not think the alimony will be taxable income. It is beingpaid out of taxed income of the other spouse for which he gets nodeduction. Under what head can it be taxed, if at all ? Please letthe group know if you find any case law on the issue. It may comehandy for those of us who are planning to go for a divorce.>> CA. Pramod Goenka>> Hello,> I am searching for latest noticifications/circulars/case laws onalimonies received on divorce from the perspective of income taxliability i.e. whether such receipt is taxable even if it is onetime.> Any early help will be highly appreciated.> rgds,> Deepak.