Wife Gets Alimony, Husband Pays It: Why Are They Both Paying Tax?
Wife Gets Alimony, Husband Pays It: Why Are They Both Paying Tax?
A recent social media post by tax planner, “Efiletax” has sparked fresh debate over how India’s tax laws treat alimony and maintenance payments. The post highlights what many see as a loophole in the system, one that results in both the payer and the recipient being taxed on the same amount of money.
The post describes a case where a couple was married for just six months. The husband earns ₹2.8 lakh per month, while the wife earns ₹1.4 lakh. After separation, a family court orders the husband to pay ₹1.35 lakh per month as maintenance, reasoning that the wife should be able to maintain the same standard of living as she had during the marriage.
Here’s where it gets tricky, the husband cannot claim this maintenance amount as a tax deduction. According to the Income Tax Act, maintenance or alimony is treated as a personal obligation and not a business expense. This means it does not qualify for any relief under sections like 10, 57, or 80 of the Act.
So, the husband pays full tax on his income of ₹2.8 lakh. After taxes, he is left with ₹1.45 lakh, from which he gives ₹1.35 lakh to his ex-wife as monthly maintenance.
The situation doesn’t end there. The wife, who receives ₹1.35 lakh every month as maintenance in addition to her own ₹1.4 lakh salary, now has a monthly income of ₹2.75 lakh. And under Indian tax law, monthly maintenance payments are fully taxable under “Income from Other Sources” as per Section 56(1).
Efiletax explains that only lump-sum alimony received at the time of divorce is treated as a non-taxable capital receipt. Monthly maintenance, however, is treated as regular income and is fully taxable.
The Real Winner? The Tax Department
The financial outcome of this arrangement is clear. According to Efiletax, the wife ends up with an annual income of ₹33 lakh and pays around ₹7.2 lakh in taxes. The husband earns ₹33.6 lakh in the year, pays full taxes, and then spends ₹16.2 lakh post-tax on maintenance.
“So the same ₹1.35 lakh — husband pays tax on it, wife pays tax on it. That’s double taxation — legally allowed under Indian tax law,” the post notes.
While the court’s intention may have been to ensure financial fairness after separation, the tax impact has once again raised concerns about the need for clearer guidelines on the taxation of alimony in India.
