Can one-time alimony be paid in property instead of money?

Can One-Time Alimony Be Paid in Property Instead of Money?

Yes, one-time alimony (lump sum alimony) can be paid in the form of property instead of money under Indian law. The payment of alimony in a lump sum can be settled through movable or immovable property, jewelry, fixed deposits, stocks, or any other valuable assets as mutually agreed upon by both parties or as directed by the court.

Legal Basis for One-Time Alimony in Property

1. Hindu Marriage Act, 1955 (Section 25 – Permanent Alimony and Maintenance)

Section 25 of the Hindu Marriage Act, 1955 provides for permanent alimony and maintenance to be granted either as a lump sum or in periodic payments. The court has wide discretion to decide the nature and form of alimony. While the section primarily refers to monetary maintenance, courts have allowed property settlements as part of lump sum alimony.

2. Hindu Adoption and Maintenance Act, 1956 (Section 18 & 19)

  • Section 18 allows a wife to claim maintenance from her husband.
  • Section 19 allows a widow to claim maintenance from her deceased husband’s estate.
  • Courts have interpreted “maintenance” to include monetary payments, property settlements, and even ownership of a shared household.

3. Code of Civil Procedure, 1908 – Order 23, Rule 3 (Compromise Decree)

In cases of mutual consent divorce under Section 13B of the Hindu Marriage Act, courts allow property settlements in the form of out-of-court settlements or compromise decrees, where the husband may transfer property to the wife as full and final alimony.

4. Indian Contract Act, 1872

A settlement agreement regarding alimony in the form of property is considered a binding contract under the Indian Contract Act, 1872, provided it is done voluntarily, without coercion or fraud.

Forms of Property That Can Be Given as One-Time Alimony

Alimony can be paid in different types of assets instead of cash, including:

  1. Immovable Property – Residential flats, houses, plots of land, agricultural land, or commercial property.
  2. Movable Property – Gold, silver, diamonds, and other valuable jewelry.
  3. Fixed Deposits & Bank Deposits – The husband can transfer a fixed deposit (FD) in favor of the wife.
  4. Mutual Funds, Stocks, and Bonds – The husband can transfer shares, mutual funds, debentures, or other securities as part of the alimony.
  5. Business or Partnership Rights – If the husband owns a business, he can transfer shares or partnership rights in the company.

Court’s Role in Property-Based Alimony Settlements

1. Court’s Discretion in Deciding Property as Alimony

  • The court considers the financial status, earning capacity, and needs of the wife before approving property-based alimony.
  • The court ensures that the property given as alimony is adequate for the wife’s financial stability.
  • If there is dispute over property valuation, the court may appoint a valuation officer to assess the property’s worth.

2. Written Settlement Agreement

If the alimony is settled in property, the terms must be explicitly mentioned in a written settlement agreement or a mutual divorce petition (in case of mutual consent divorce under Section 13B HMA).

The agreement should specify:
✔ Description of property – Type, location, size, and valuation.
✔ Transfer process – Whether it will be a gift deed, sale deed, or transfer of ownership.
✔ Timeframe – Within what period the property will be transferred.
✔ Irrevocability – Once transferred, the husband cannot reclaim the property.

3. Court Order / Consent Decree

  • The court must pass an order validating the property settlement.
  • Once passed, the order is binding, and non-compliance may lead to contempt of court proceedings.

Important Supreme Court and High Court Judgments

  1. Rajnesh v. Neha (2020) 3 SCC 794
  • The Supreme Court held that maintenance and alimony include financial arrangements, including property transfer.
  1. Kusum Sharma v. Mahinder Kumar Sharma (2015 SCC OnLine Del 6793)
  • The Delhi High Court ruled that property settlements can be an alternative mode of fulfilling alimony obligations.
  1. Smt. Vanamala v. H.M. Ranganatha Bhatta (1995) 5 SCC 299
  • The Supreme Court clarified that maintenance can be settled through money or property depending on the wife’s needs and the husband’s capacity.
  1. Swaraj Garg v. K.M. Garg (2017 SCC OnLine Del 7832)
  • The Delhi High Court observed that giving property as one-time alimony is valid and binding if done with mutual consent.

Tax Implications of Property-Based Alimony

1. No Tax Liability for the Recipient Wife

  • Lump sum alimony received in property is not taxable in the hands of the wife under Income Tax Act, 1961.

2. Capital Gains Tax for the Husband

  • If the husband transfers property as alimony, he may have to pay capital gains tax if the property is sold later.
  • To avoid this, he can use a gift deed, which is tax-exempt under Section 56(2) of the Income Tax Act.

Key Considerations Before Accepting Property as Alimony

  1. Market Value – Ensure the property has a fair market value equivalent to cash alimony.
  2. Legal Ownership & Title Clearance – Verify that the property has clear ownership, no encumbrances, or legal disputes.
  3. Gift Deed or Sale Deed – The husband should execute a proper legal document (registered gift deed or sale deed) for valid ownership transfer.
  4. Transfer Process – Ensure the transfer is completed before the final divorce decree to avoid complications.

Conclusion

✔ One-time alimony can be paid in property instead of money, provided it is mutually agreed upon and approved by the court.
✔ The court can enforce property-based alimony if it ensures financial security for the wife.
✔ Property transfer should be legally documented (via gift deed, sale deed, or court order).
✔ The wife should verify the legal title and market value before accepting property as alimony.
✔ Tax implications should be considered by both parties before finalizing the settlement.

If you are considering property-based alimony, it is advisable to consult a family lawyer to ensure that the settlement is legally sound and enforceable.

Disclaimer: This information is intended for general guidance only and does not constitute legal advice. Please consult with a qualified lawyer for personalized advice specific to your situation.

Advocate J.S. Rohilla (Civil & Criminal Lawyer in Indore)

Contact: 88271 22304

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