How marriage and divorce can influence your taxes in India

December 11, 2025 Finance Talk Valli Sarvani

Major life events like getting married or ending a marriage can quietly alter your tax situation.

Several everyday aspects, such as gifts received, money given to a spouse, a child’s earnings and alimony, are treated differently under income-tax rules.

Here’s a clear guide to help you understand where tax applies and where it doesn’t.

Under normal circumstances, receiving gifts worth more than ₹50,000 in a year can lead to taxation.

However, wedding-day gifts for the bride and groom are fully exempt, no matter how expensive they are.

This special exemption does not extend to parents or relatives. Their gifts can still be taxed if the total crosses the limit.

Tax officials often examine unusually large or suspicious gift amounts. Passing off undisclosed income as “wedding gifts” may trigger inquiries and can result in 60% tax, along with penalties.

Giving money or assets to your spouse does not attract tax immediately. The tax angle appears later: any income earned from those gifted assets is added to the higher-earning spouse’s income.

This mechanism, called the clubbing rule, stops applying once the couple divorces or if either spouse dies.

A child’s earnings can come from two sources, and the tax department treats them differently:

Passive income (interest, rent, dividends)

Added to the income of the parent who earns more.
A small relief of ₹1,500 per child is available.

Income from their own skills (acting, sports, music, etc.)

Taxed in the child’s own hands.
No clubbing applies.
Disabled children are also exempt from clubbing provisions.

In India, alimony doesn’t follow a single tax rule.

Its treatment depends on court interpretation:

One-time lump-sum payments are treated as a capital receipt, not taxable.
Monthly or regular payments are counted as income for the recipient and are taxable.

The spouse paying the alimony cannot claim any tax deduction.

Image from Pxhere (Free for commercial use / CC0 Public Domain)

Image Published on March 27, 2017