The income Tax Act has specified different nature of incomes and their taxability. But there is no specific mention for Stipend Income. This makes it difficult to determine whether the stipend is taxable or not. The stipend can be classified based on the purpose of payment. It can be classified into the following two categories:
- As a Salary Income or
- As a Scholarship
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 examples of scholarship are research fellowships, and 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.
Stipend as a Salary Income
When a 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 although it is generally lower pay than salary.
Example – Stipend paid to doctors
In the case of doctors receiving stipends 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.
Example – Stipend paid to CA students
Any student pursuing the course of CA and doing articleship, receives a stipend from their 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.
TDS on stipend
Generally companies 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.
Stipend is taxable under which head of income?
Treated as Salary
- If your employer has already deducted TDS and issued Form 16 then the stipend will be taxed under the head ‘Income from Salary’ even if TDS is not deducted by the employer.
- If your stipend is taxable, you can save tax only by claiming deductions under Chapter VI-A.
- Any other expenditure incurred can not be claimed as a deduction from the stipend income.
Treated as Scholarship
- It is exempt from Income Tax.
- It is not mandatory to file ITR when the gross taxable income is below the exemption limit. However, you can voluntarily file the ITR on the e-Filing portal and show it under the Schedule ‘Exempt Income’.
FAQs
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.
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.
‘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 section 10(16).
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).
Hi @Debapriya_Basu
The scholarship is exempt u/s 10(16) of the IT Act. You can read more about Is Stipend Income Taxable in India? - Learn by Quicko
Hi @Qwwq,
An Individual receiving a salary from more than one employer has to consider the total salary received from all employers for computing the total income.
Hence, you need to include your stipend in your total income, which will be taxable as a whole after claiming deductions. No exemption can be claimed for a stipend received as income.
Hope it helps.