01 August 2009
If the stipend is earned as an employee of an organisation in India, and you are sponsored by such a organisation, the employer-employee relation should be established and in that event the stipend becomes taxable under the head the salaries. In the absence of an employer-employee relation, the stipend becomes taxable under the head income from other sources. If the stipend is taxable as salary, the deduction available to you is standard deduction. If it is taxable under the head income from other sources, then you can claim any other expenditure laid out or expended wholly and exclusively for the purpose of earning of stipend income. This deduction is allowable under Section 57 (iii) of the Income-tax Act ‘61.
Income-Tax Appellate Tribunal, Jaipur Bench in Sudhir Kumar Sharma versus ITO (1983) 15 Taxman 100 (Mag.). The Tribunal in this case had held that the stipend received by an articled clerk from a Chartered Accountant was exempt under Section 10(16). The reason given by the Bench was that the stipend was paid to meet the cost of books, coaching fees, examination fees and so on.
3 Bangalore Bench of Income-Tax Appellate Tribunal in ITO versus Dr G. N. Ramachandran 1 ITD 902, where the Tribunal held that the stipend received to meet the cost of education would be exempt under Section 10(16).
However in all the three cases the assesee had to prove that the stipend received by the them was in the nature of scholorship to meet the cost of education. It implies that, stipend is in the nature of scholorship, will have to proved in each case to claim exemption.