Alimony and Income Tax: Is ex-wife liable to pay income tax on settlement amount received from husband in a divorce case?
The law mandates women have a right to get financial support from their spouse during separation or following a divorce. This financial support is called alimony, however, it’s not as simple as it seems. It may be a one-time payment of a lump sum, or it may be in the form of regular payments or a combination of both. Often interim maintenance payment starts before divorce while it may also continue after divorce. Sometimes alimony is not pure financial support, rather it can be distribution of family assets also.
Each alimony case is distinct and personal to the case at hand. Regardless of this fact, alimony is a financial transaction and like all financial transactions are required to stand the scrutiny of income tax liability. So, do the beneficiaries receiving alimony need to pay income tax on it? The answer to this is tricky.
Source – Economic Times