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Is Stipend Taxable in India?

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Hiral Vakil

Form 16
Salary Income
TDS
Last updated on May 25th, 2021

Income Tax Act has specified different nature of incomes and their taxability. But there is no specific mention of Stipend Income. This makes it difficult to determine whether the stipend is taxable in India or not. The stipend can be classified based on the Objective of a stipend. It can be classified in the following two categories:

Stipend as a Salary Income

When stipend is paid as remuneration for services provided while gaining experience, it is considered as salary. Here, the objective of a stipend is not to meet education expenses but to compensate for the duties performed similarly to a full-time employee.

Example – Stipend paid to doctors

In the case of doctors receiving stipend at hospitals while they pursue a higher degree, the scenario is similar to a salary. Here, they are performing duties like regular full-time doctors and at the same time gaining experience in their respective fields. That’s why the stipend received by the doctors will be taxable as salary income in India.

Example – Stipend paid to MBA Interns

Even MBA students who go through an internship before completion of their course duration, receive remuneration for the same. Although it may not be in the nature of formal salary, it is paid for the services rendered while gaining experience. So this remuneration received during an internship will also qualify as salary and thus taxable.

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Stipend as a Scholarship

The scholarship is granted to meet the cost of education. The stipend will be considered a scholarship if the objective is to give the means of supporting education. Some of the examples of scholarship are research fellowships, awards for academic achievement. All these will be exempt from tax. Even if the grant or Scholarship amount is not fully utilized or it is utilized for some other purpose, the full amount will be exempt from tax. The scholarship is exempt u/s 10(16) of the IT Act.

Example – Stipend paid to CA students

Any student who is pursuing the course of CA and doing articleship, receives a stipend from his principal. This stipend amount is governed by an act and it is provided to CA students to meet the expenses of material and exam fees. Thus it falls under the category of a scholarship and is exempt from tax.

Stipend and TDS

Companies generally do not deduct TDS on stipends paid to their interns, but it does not mean that the income would be tax-free. The taxation would be based on the nature of the payment. If the company has already deducted tax and the individual has received a Form 16 from the payer, the tax will fall under income from salary.

With respect to saving tax on stipends, the only deductions that can be claimed are those that fall under section 80D.

Where to show Stipend Income while Filing ITR in India?

Taxable Stipend treated as Salary Income in India

Stipend treated as Scholarship

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FAQs

Is it mandatory to file ITR for stipend income?

ITR filing is mandatory if the following conditions are fulfilled:
1. Stipend Income is treated as Salary Income,
2. Total stipend earned during the year is more than INR. 2,50,000.

Is TDS applicable on stipend income?

It depends on the category of stipend. If a stipend is treated as Salary Income then TDS will be applicable. But if a stipend is treated as a Scholarship then TDS will not be applicable. Since scholarship is exempt from taxes.

Where do I show stipend on tax return?

‘Salary’ received by an ’employee’ is taxable in the hands of the employee, thus stipend which is in form of salary is shown under the head ‘Income from Salary’. However, the Income Tax Act has further laid down that ‘scholarship granted to meet the cost of education’ is exempt from Income Tax under the section 10(16).

Got Questions? Ask Away!

  1. Hey @Dia_malhotra ,
    As per the Income Tax Act, stipend is a scholarship given to meet the education expenses. Thus, it is exempted from income tax under Section 10 (16).