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Are Stipend Income Taxable

Mitali , Last updated: 22 February 2024  
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Is Stipend Taxable

What Is A Stipend?

A stipend is a sum of money paid to someone which are typically smaller than salaries and are provided to individuals to support them financially while they gain knowledge and experience through education, training, or specific positions.

Who receives a stipend?

Common recipients include researchers, graduate students, interns, and apprentices.

Stipend-based roles are mainly training and learning, with the primary beneficiary being the recipient rather than the employer.

Employers offering stipends for internships may not guarantee future employment or have recipients replace regular employees.

Is Stipend Income Taxable?

  • Stipend income is taxed under the head "Income from salaries" if TDS is deducted by the employer and Form 16 is issued.
  • If TDS is not deducted, stipend income is to be reported under the head "Income from other sources".
  • Stipend income is treated as a scholarship if it is exempt from income tax.

Stipend as per Income

  • Stipend to doctors - Stipends paid to doctors during higher education at hospitals are treated as salary income since they perform work similar to full-time doctors.
  • Stipends to CA students - Stipends received by CA students during articleship are generally not considered as income but as compensation for incidental expenses, falling under the category of scholarship and hence exempt from tax.
  • Stipend to MBA interns - MBA or engineering interns receiving stipends for work similar to regular employees in their field are subject to tax as the stipend is provided for gaining experience as full-time employees.

Is TDS Applicable on Stipend?

  • Companies may or may not deduct tax on stipends, but it can still be taxable based on the payment's nature.
  • If tax is deducted and a Form 16 is issued by the employer, the stipend is taxed under the head of Salaries.
 

Stipend vs. salary

Basis

Stipends

Salaries

Nature of Payment Stipends are fixed sums provided to support individuals during educational or training. Salaries are regular payments for services rendered in a professional capacity.
Purpose Stipends are often awarded to facilitate learning or research experiences. Salaries are compensation for work performed in a specific position.
Taxation Stipends may or may not be subject to taxation depending on various factors such as the nature of the stipend. Salaries are generally subject to taxation under the head of "Income from Salaries".
Duration Stipends are often temporary and finite, provided for a specific period or project. Salaries are typically ongoing and associated with a permanent employment contract.
 

Is it compulsory for individuals earning stipend income to file an Income Tax Return?

When gross total income is below the exemption limit, it is not mandatory to file an Income Tax Return, but if filed voluntarily, stipend income can be shown under the schedule for exempt income.
 


Published by

Mitali
(Finance Professional)
Category Income Tax   Report

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