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Divorce Settlement means that both parties involved in the marriage will be asked to come forward and settle their differences regarding all issues related to property, maintenance, child custody etc. The court will then give its decision based on what both parties have agreed upon.

Calculation of the Alimony Amount In case, the husband or the wife pays monthly alimony, they have to provide 25% of their monthly income as per the guidelines of the Supreme Court of India. There is no strict rule or benchmark rule in cases of one-time payments.

Mutual Divorce Alimony Taxation This judgment, however, only considers cash payments as alimony and does not include transfers of assets. Alimony in India is not taxed if it is paid as a lump-sum amount in the form of cash. However, if it is received every month, it becomes taxable income.

For example, payments made to compensate a plaintiff for actual damages or harm caused by the defendant's action generally are deductible. However, some settlement payments or legal fees may be characterized as capital expenses if they are incurred in connection with the acquisition of a capital asset.

What Lawsuit Settlement is not Taxable? Compensation money awarded for visible injuries is considered tax-free, so there is no need to include these settlements in your yearly tax report. As mentioned, settlement awards from personal injury lawsuits that demonstrate ?observable bodily harm? are not taxable by the IRS.

When maintenance laws is paid periodically: When the maintenance laws is paid periodically/monthly, it is set at 25% of the total monthly salary of the husband. The Supreme Court of India, in one of its judgments, stated this 25% is the benchmark amount and is also just and proper.

A structured settlement is an arrangement in which the settlement payment is paid out over time, rather than in a lump sum. This can help to avoid taxes on the settlement payment by spreading out the tax liability over a longer period of time.

For divorce agreements executed or modified after the end of the year on December 31, 2017, alimony payments are no longer tax-deductible for the payer, and the recipient does not have to report them as taxable income.