Tax on Maintenance Allowances on Divorce

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  1. C K THAKUR

    C K THAKUR New Member

    Is maintenance allowances paid to wife on divorce is taxable or not?
     
  2. ZED

    ZED Well-Known Member

    For wife it is an income if it is a revenue receipt of recurring nature. If the lump sum amount is paid then it would be treated as capital receipt.

    Bombay H.C in case of "Princess_Maheshwari_Devi_Of_..._vs_Commissioner_Of_Income-Tax_on_15_July,_1982" [Judgement attached] held the following test for a receipt to be as an income.


    "in order that a receipt by an assessee should constitute income, it must satisfy the following ingredients :

    (1) it must be a periodical monetary return which, in my opinion, must mean a return for labour and/or skill and/or capital;

    (2) coming in with regularity, or expected regularity ;

    (3) from a definite source ;

    (4) excluding a receipt "in the nature of a mere windfall", i.e., not a windfall in regard only to the extent or quantum of what is received". "



    Further, Double Taxation Avoidance Agreement also specifically cover this

    Extracts From India-USA DTAA
    Alimony paid to a resident of a Contracting State shall be taxable only in that State. The term -alimony- as used in this paragraph means periodic payments made pursuant to a written separation agreement or a decree of divorce, separate mainte-nance, or compulsory support, which payments are taxable to the recipient under the laws of the State of which he is a resident.

    [Interpret the term State or contracting State as India or USA, as the context require.]
    [In USA also alimony is taxable.]
     
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