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Is Stipend Income Taxable?

A stipend is nothing but a payment made to a trainee or a person - who is a learner - for living expenses. It is unlike a salary or wages which an employer pays to an employee. This ‘stipend’ amount is a pre-determined sum paid by the employer to aid offset expenses. Usually, stipends are paid to that category of people who are not eligible to get a regular amount as salary in the interest of the services or duties they offer, such as interns. This amount paid is generally small, lower than a salary paid. However, the receiver of the stipend gets maximum experience, understanding and knowledge in the field chosen.

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).

How is Stipend broken down?

To receive an amount as a ‘stipend’, the person undertakes work, for which the employer offers support by defraying living expenses.

For example, Interns, clergy, apprentices are the ones who are eligible to obtain ‘stipend’. This payment is done as a financial support towards their involvement in the given task. Many a times, a stipend goes hand in hand with higher education.

What are the different types of Stipends?

Stipends can be provided to scientists or researchers at educational institutions or companies to meet their project expenses. This amount can be given by third-parties who require an intern or individual to carry out certain research without any economical diversion thereby hampering the researcher. Many a times, foundations do offer stipends on conditions same as above, as a help to the scientists or researchers during their project development.

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When is Stipend considered as a ‘Salary’?

Well, the term stipend is still confused with scholarship as well as salary! Let’s see when stipend is actually considered as a ‘salary’:

Medical practitioners receiving stipend in the hospitals

The income received from the stipend is taxable since medical practitioners or doctors conduct duties that are almost equivalent to the rest of the doctors. Besides, their training and the work experience received on duty would lead them to become fully trained medical practitioners.

MBA graduates

Well, you might have come across engineering graduates as well as MBA graduates receiving stipend for the services they provide and the experience that they earn. This amount is however taxable in case you are paid to learn services just like a full-time employee.

When is Stipend considered as a ‘scholarship’?

Research, fellowships, grants from universities, etc. received to help someone get their education are all exempt from tax and therefore considered as a ‘Scholarship’. This amount should be paid in lieu of someone’s purpose of education. Also, a person undergoing articleship training for a CA firm is given a stipend and is exempted from tax.

When should you file Income Tax Return?

In case your total annual income from various sources exceeds Rs. 2,50,000 in a financial year, you should file income tax return.

What is TDS on Stipend?

There are certain companies who may not deduct tax on Stipend. However, it would still be taxable, depending on the payment received. In case your employer has deducted tax and given you Form 16, the payment received would be then taxed as ‘salary’. If not, this would be then generally taxed under the ‘Income received from other sources’ section.

If you earn an amount as a stipend which is however taxable, there won’t be any deduction for any expenses incurred to earn the stipend. You can easily save this tax under Section 80 Deductions .