Child Maintenance treatment

What was the judgement did judgement read that he needs to make a lump sum payment in 5-6 installment or he need to pay a certain amount every year?

If the judgement read that he is going to make lump sum payment in installments then it won't be taxed otherwise it will be taxed.

You can invest in 80C and save some tax and invest in other tax saving options.

In what ever form you receive it they will be taxed as your income if it's revenue in nature the value of such bonds would be your income.

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Thank you

Hi

1.Yes

2. monthly maintenance is taxable as it is considered to be an income. Instead of paying monthly maintenance, if the spouse had borne certain expenses such as payment of school fees, payment towards rent of the house etc., then such amount would not be taxable.

3.if received only once as settlement, then it will not be taxable..

Hope it helps 

Hi,

Hope you are doing well !!

1. Yes, still it is considered as revenue receipts. 

2.Instead of giving amount for maintenance, spend the amount directly on expenses related to child education.

So, it will not be treated as revenue receipts.

3. If it is paid in lum-sum or one time receipt in form of cash, it will be treated as capital receipt i.e. no tax liability on the same.

Hello,

1. If you receive it as a monthly payment, then it will be taxable. Otherwise, if it paid to you in a lump sum or as a one-time payment, then it will not be chargeable to income tax.

2. If it is paid for certain expenses instead of the monthly payment, then it will not be charged to tax.

3. If it is received in gold bonds, then it will be treated as a gift and will be taxed as per gift provisions. Any interest income earned on such gold bonds would also be taxable in your wife's hands.

I hope this answer satisfies your requirement.

Regards,

CA Hunny Badlani

Hi,

- It will still be considered as a capital receipt because the very basic basis of taxation is that you should get monthly or regularly installments for the child maintenance.

- If the husband pays directly for the child expenses then I think it is not taxable in such case also.

- Interest on gold bonds will be taxable in the hands of wife.

Thanks

If the lumpsum/single amount is declared by the court then it can be argued based on the case laws. We need to find out the case laws in our favour.

1) Yes it will be still taxable

2) No since most of the time such maintenance are under direction of court so it has to be officially disclose. However you can claim actual expenses incurred against same and net it off

3) Than income earned out of that gold bond that is interest and capital gain arising at the time of selling of bond shall be taxable. Mere changing its mode will not affect its tax impact. However father can gift his child bond and which will be exempt if child is adult

You can set off expenses against other source income only. As a rule if there is any income which is chargeable to tax under income from other source it should be net off the expenses.

Apart from that as per Section 125 of the Criminal Procedure Code, a court can order the husband to pay for maintenance of his wife and children which is mainly on account of reimbursement of expenses incurred by her and not to earn profile out of it.

Anything with intent to earn profit or comprising of an element of profit can only be taxed. Monthly Maintenance is always provided with an intention to provide support and not to act as a source of income and hence same can not be subject to tax fully as income

Hello Sir,

-Alimony in the form of monthly/quarterly payouts is treated as revenue receipt and taxed in the hands of the receiver. It is added to her total income and taxed as per the tax bracket. No deductions available for the payer. 

Lump sum alimony is treated as capital receipt and hence is tax-free. 

-If it is paid for expenses related to child maintenance, then it may not be charged to tax.

But it is subject to litigation.

-The gold bonds will be treated as gift in the hand of receiver. Any income income earned on such bonds will be taxable in your wife's hands.

Hi 

A lot of it depends upon how the court order/ amicable settlement agreement is worded.

Further, there is no one straight forward answer to this but even if the money is being received in 5-6 installments but it's just a break-up of one lump-sum amount, it can be considered capital asset. Needless to say, it's not free from litigation.

Gold bond will not help. It's as good as cash.

Hello,

In line with your comment that child is suffering from a disability you can refer section 64(1A) which bars from taxing any amount received by the minor and clubbing with the parents.

For Case studies you can refer to below cases

Punjab & Haryana High Court in Payal Mehta v. Sanjay Sarin (2016)

Madras High Court in K.M. Vijayan & Ors. v. Union Of India &Ors

Also you can refer to a government paper which is presently working to tax total amount and bring it under tax net which means that as of now it is not subject to tax

LAW COMMISSION OF INDIA

Report No.265

Prospects of Exempting Income arising out of Maintenance Money of ‘Minor’

March, 2017

D.O.No.6(3)/307/2016-LC(LS) dated 20th March, 2017 

Hi,

- Income of minor child is clubbed with the parent who is taking care of him and he is required to pay tax on it.

- Credit of money in bank account - It depends on the court order.

Thanks

Hi,

Income of a minor is taxable in the hands of the parent whose total income is higher (before including the minor's income).

If the parents are divorced it is clubbed with the person who is maintaining the child. There is one exception to this rule - if the minor has earned an income because of his own manual work, or used his talent or specialised knowledge & experience OR in case of a minor who is disabled (based on definition of disability in Section 80U) and earns an income, such income will not be clubbed.

2. Maintenance should be received in the account decided by court order.

If the minor is suffering from autism then you can claim deduction of expense incurred for his medication u/s 80DD upto Rs. 75000 and if the disability is severe then you can claim Rs. 125000 as deduction from income.

In case of a minor living with single parent his income will be taxed with the parent and parent can claim deduction of expenditure incurred after getting proper certification.

Minor cannot file separate income tax return.

Thank you

Return of the child can't be filed independently, his income will be clubbed with the income of the parent who is taking care of him.
Maintenance should be received in the account mentioned by court.

1. The child can not file the ITR independently.

The income will be clubbed in parent income who is maintaining the child.

2. As per court order- it will be transfer.

Hi

Since the child is disabled, his income will not be clubbed with the parents.

You should receive money in child's account and file his return of income.

Further, if father directly pays for his expense, then there is no income