One Time Settlement in Divorce: How Lump Sum Alimony Works

A one time settlement in divorce is an arrangement where one spouse pays the other a single, fixed lump sum of money (and sometimes property) in full and final settlement of all alimony and maintenance claims, instead of paying monthly maintenance for years. Once the court accepts it and the decree is passed, neither spouse can ordinarily go back and ask for more. It is most commonly used in mutual consent divorce under Section 13B of the Hindu Marriage Act, 1955 (HMA), and the court's power to award such permanent alimony flows from Section 25 of the HMA.

Part of the maintenance and alimony practice at S Jain & Attorneys, Bangalore.

In plain terms: instead of ₹X every month, you agree on a one-time figure, write it into a settlement deed, place it before the court, and close the financial relationship cleanly. Below we explain how a one time settlement works, how the lump sum amount is decided, the tax position, and what a properly drafted settlement deed must contain. For tailored help, see our family and divorce law practice page.

What "one time settlement in divorce" actually means

When a marriage ends, the financially dependent spouse usually has a right to maintenance or alimony. This can be paid in two broad ways:

• Periodic (monthly) maintenance, a recurring sum, often ordered under Section 125 of the Code of Criminal Procedure (now Section 144 of the Bharatiya Nagarik Suraksha Sanhita, 2023, verify the current section number with your advocate), or under Section 24 (interim) and Section 25 (permanent) of the HMA.
• Lump sum / one time settlement, a single consolidated payment in lieu of all future maintenance.

Section 25(1) of the HMA expressly allows the court to order permanent alimony and maintenance as such gross sum (a lump sum) or such monthly or periodical sum as it thinks just, having regard to the income and property of both parties, their conduct and the other circumstances of the case. So a one time settlement is not a workaround, it is one of the two payment modes the statute itself contemplates. In a mutual consent divorce, the spouses negotiate the figure themselves and the court records it; in a contested matter, the court fixes it after hearing both sides.

Two further sub-sections are worth knowing, because they explain why the drafting of a lump sum settlement matters so much. Section 25(2) lets a court vary, modify or rescind a maintenance order if the circumstances of either party change. Section 25(3) lets it rescind an order if the person receiving maintenance remarries. Those powers attach to a continuing order. A lump sum that has been paid, accepted and recorded as full and final leaves no continuing order to vary, which is precisely the protection both sides are buying.

Section 25 does three things, and together they explain why a properly recorded lump sum is hard to reopen.

Lump sum alimony vs monthly maintenance: which to choose?

The choice between lump sum alimony and recurring maintenance is one of the most important financial decisions in a divorce. Here is a side-by-side comparison.

There is no universally better option. A clean break through a one time settlement suits parties who want finality and can fund a single payment. Monthly maintenance suits a recipient who needs steady income, or a payer who cannot raise a large sum at once.

Key takeaway. The real question is not which number is bigger. It is who you would rather be in five years: the person who has been paid and is free, or the person still filing execution petitions to recover arrears. A lump sum that is 20 per cent lower than the monthly stream would notionally have delivered is often still the better deal for a recipient, because it is money actually received rather than money theoretically ordered. Weigh the payer's real capacity to keep paying, not just his capacity to promise.

How is the lump sum alimony amount decided?

There is no fixed formula in Indian law for lump sum alimony. Courts decide what is just on the facts. In Rajnesh v. Neha, decided on 4 November 2020, the Supreme Court set out comprehensive guidelines for maintenance across all matrimonial statutes and made an Affidavit of Disclosure of Assets and Liabilities mandatory for both sides in every maintenance proceeding in the country, precisely because claimants tend to overstate need and payers tend to understate income. If you are negotiating a lump sum, that affidavit is your evidence base, and you should insist on it. Typical considerations include:

• The income, assets and liabilities of both spouses.
• The standard of living the parties enjoyed during the marriage.
• The duration of the marriage (longer marriages often justify higher settlements).
• The age and health of the parties.
• Whether the recipient spouse sacrificed a career for the family.
• Custody and child-related responsibilities (child support is separate from spousal alimony).
• Reasonable needs of the recipient versus the capacity of the payer.

On quantum, the most frequently cited benchmark comes from Kalyan Dey Chowdhury v. Rita Dey Chowdhury Nee Nandy, decided on 19 April 2017, where the Supreme Court took roughly 25 per cent of the husband's net salary as just and proper maintenance, and pointedly held that 25 per cent of the gross salary was not permissible. Some courts have referred more broadly to a range of one-fourth to one-third of the paying spouse's income or net worth as a starting point. Treat all of this as a rough guide, not a binding rule. The figure is ultimately negotiated (in mutual consent) or judicially fixed (in contested matters), and child support or maintenance for children is separate and is not extinguished by a spousal one time settlement.

Common mistake. Converting a monthly figure into a lump sum by simple multiplication. A settlement of "₹30,000 a month for ten years, so ₹36 lakh" ignores that the recipient gets the whole sum today and can invest it, and it ignores that the payer is being released from a claim that could otherwise have been revised upward for life. Both sides should model the number, not multiply it, and both should get the arithmetic checked before signing. This is where the biggest avoidable losses in Indian matrimonial settlements happen.

Tax on lump sum alimony: is it taxable?

The tax position on a one time settlement is a frequent worry, and the general understanding under Indian tax law is as follows. This is a summary for orientation only; confirm with a chartered accountant for your specific facts.

Key practical points:

• For the payer, alimony is generally not deductible, it is paid out of post-tax income.
• A lump sum is the tax-efficient structure for the recipient in most cases, which is one more reason it is popular.
• If the settlement includes immovable property, factor in stamp duty and registration charges (a Karnataka-specific cost in Bengaluru matters) and clarify who bears them in the deed.

Because the law here turns on case law rather than an express exemption clause, always get the treatment confirmed in writing by a tax professional before signing.

Drafting the settlement deed: clauses you cannot skip

Drafting the settlement deed correctly is what makes a one time settlement actually final and enforceable. A loosely drafted deed leaves room for fresh litigation. A well-drafted memorandum of settlement (often filed along with the joint Section 13B petition) should typically cover:

1. Parties and recitals, full names, the fact of marriage, date and place, and that the parties have decided to dissolve the marriage by mutual consent.
2. The lump sum figure, the exact amount in words and figures, the mode of payment (cheque, NEFT or demand draft), and the timing, for example a tranche at first motion and the balance at second motion.
3. Full and final language, an express recital that the amount is in full and final settlement of all claims to alimony, maintenance, streedhan, dowry articles, and any other monetary claim.
4. Streedhan and articles, a clear list of jewellery and articles being returned or retained, to avoid later disputes.
5. Property, description of any immovable or movable property transferred, who bears stamp duty and registration, and timelines.
6. Child custody, visitation and child support, which are separate from spousal alimony; address them clearly, or expressly state they are dealt with elsewhere.
7. Withdrawal of pending cases, a clause that both sides will withdraw or seek quashing of pending proceedings, for example under the Protection of Women from Domestic Violence Act, Section 125 CrPC now Section 144 BNSS, and criminal complaints, as part of the settlement.
8. Non-payment or breach clause, what happens if a tranche is not paid; ideally the second-motion decree is conditional on receipt of the full sum.
9. No further claims, a mutual release of all future claims, including against each other's families.
10. Governing law, jurisdiction and execution, and proper stamping and notarisation or registration where required.

A practical safeguard in mutual consent matters is to sequence payment with the court stages: a part at the first motion and the balance handed over in court at the second motion, so the recipient is protected and the payer is not exposed to a situation where money has been paid and consent is then withdrawn. Your advocate will tailor this to the facts. For how these stages fit into the wider process, read our guide on family court procedure in India.

Common mistake. Paying the entire lump sum before the second motion, on the strength of a signed memorandum of settlement. Consent under Section 13B can be withdrawn until the decree is passed, and a payer who has already parted with the money is left suing on a contract instead of walking out with a decree. Hand over the final tranche in the courtroom, on the day the second-motion statement is recorded, and have the deed say so in terms.

Does a one time settlement bind a future court?

Largely yes, if drafted and recorded properly. Where a lump sum has been paid and accepted in full and final settlement and the decree records it, courts are generally reluctant to reopen alimony, because there is no subsisting order left to vary under Section 25(2). However, courts retain a welfare-based power over children: child maintenance and custody arrangements can be revisited in the child's interest regardless of what the adults agreed. If grandparents are involved in the child's life, see our note on grandparents' visitation rights.

One time settlement in a mutual consent divorce (Section 13B HMA)

In a mutual consent divorce, the one time settlement is negotiated before or alongside the petition. The Section 13B process has two stages:

1. First motion, joint petition filed; statements recorded. Section 13B(1) requires that the parties have been living separately for one year or more.
2. Cooling-off period, ordinarily six months under Section 13B(2), but the Supreme Court in Amardeep Singh v. Harveen Kaur (2017) held this period is directory, not mandatory, so courts can waive it where the settlement is genuine and reconciliation is impossible.
3. Second motion, the parties reaffirm consent; the decree of divorce is passed, recording the settlement terms.

Deadline warning. Section 13B(2) does not only impose a floor of six months, it imposes a ceiling. The second motion must be made not later than eighteen months after the date the joint petition was presented. Let that window close and the petition lapses, and a couple who have already negotiated, paid and moved on find themselves starting the whole process again. Diary the eighteen-month date on the day of the first motion, and do not let a delayed tranche of money drift you past it.

Embedding the lump sum into this process gives it judicial backing, which is what makes it hard to reopen later. You can read the Hindu Marriage Act, 1955 on the Government of India's official portal, India Code.

Common mistakes to avoid

• Oral agreements, "he promised to pay" is not enforceable; get it in a signed, court-recorded deed.
• Vague full and final wording, if the deed does not expressly release all heads of claim, a fresh maintenance petition can follow.
• Ignoring child support, bundling it into spousal alimony can be challenged; keep it distinct.
• No payment-timing safeguard, handing over the full sum before the decree, with nothing securing the second motion.
• Settling without the disclosure affidavit, negotiating a lump sum against a figure the other side simply asserted, when Rajnesh v. Neha entitles you to a sworn statement of assets and liabilities.
• Forgetting tax and stamp duty, especially where property changes hands.
• Skipping registration or stamping where the law requires it for the document to be valid evidence.

Frequently Asked Questions

This article is for general informational purposes only and does not constitute legal advice. Laws change and every situation is different; please consult a qualified advocate about your specific matter.

Related guides and where to get help

If this is a live problem rather than background reading, our family and divorce law practice handles these matters from Bengaluru, including for clients who cannot attend court in person. These guides go deeper on the neighbouring questions:

• Is Alimony Taxable in India? Tax on Lump Sum and Monthly Maintenance
• Divorce Settlement Agreement in India: What It Covers
• Maintenance and Alimony in India: Common Misconceptions Both Husbands and Wives Get Wrong