Tax Issues on Marriage/ Divorce/ Alimony

Marriages are made in heaven, conducted in wedding venues, and governed by Marriage Acts.

In India, Hindu Marriage Act of 1955 applies to weddings among Hindus, Jains, Buddhists, and Sikhs. As per the Act, the marriage may be solemnized in accordance with the customary rites. Where such rites and ceremonies include the Saptapadi (that is, the taking of seven steps by the bridegroom and the bride jointly before the sacred fire), the marriage becomes complete and binding when the seventh step is taken. There is no mention of Mehandi, Haldi, Sangeeth, Homa, tying the knot, etc. in the Act. They are the acts of tradition, culture, and customs in society.

Gifts are part of marriages. Your presents are your presence! Are there any taxes on gifts received at weddings? The good news is that any gift either in kind (like Gold, Silver, Car, Watch, Suit, Boot, etc.) or in Cash, either from relatives or from friends and non-relatives is fully exempt from Income Tax and there is no gift tax in India.

Divorce: A few news items have drawn my attention including someone applying for divorce because the husband is not fighting, the wife is not talking much (or talking too much) or snoring by husband (like a train sound)! None of them is listed in the Act as a reason for Divorce. As per the Act, the grounds of Divorce include, among other things cruelty, unsound mind, etc.,

Is second marriage allowed? (Is anyone interested to know this, when one marriage itself is a challenge to manage!) Still, for enthusiastic individuals, the Act poured cold water, by restricting second marriage, when the first wife is alive or till legally divorced.

Alimony: What happens when a divorce takes place? The wife can ask for alimony (akin to compensation). There are two types, (a) One-time lump sum payment and (b) Monthly maintenance payment (like salary).

The Income Tax provisions do not specifically mention anything about alimony. However, based on Court rulings, the one-time payment is considered a capital receipt, exempt from tax. The monthly maintenance is a revenue receipt and thus, taxable in the hands of the recipient.

Can the monthly maintenance amount be modified? Yes, it can be increased through the passage of time. Recently Court ruled to enhance the compensation in one of the cases; similarly, it can be reduced or canceled, based on the changing circumstances.

Is the alimony given only to the wife? Not necessarily. If the husband is disabled, and the wife is working, alimony is granted to the husband.

What can be done for jointly held properties before the divorce? It is advisable to relinquish the rights by either of the spouses before the divorce so that any gift between husband and wife is exempt from tax!

Recently, I read in the media that a couple celebrated their 75th wedding anniversary. This is an inspiration to me and my fellow married men and women, reminding them that divorce is a costly affair, and therefore let us focus on HARMONY rather than ALIMONY.

Wish you all a belated happy new year 2023

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About B E Kumar Prasad

B E Kumar Prasad
He is a Practicing Chartered Accountant in Bengaluru, India. He has 25+ years of experience in income tax, business setup, and NRI matters. He is also an Insolvency Professional and Registered Valuer (F&SA).Prasad welcomes your comments and questions. Please email him at simplifiedlaws20@gmail.com

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