Tax on articleship stipend

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Querist : Anonymous

Querist : Anonymous (Querist)

03 July 2011 Is articleship stipend to a CA student taxable under the head Income from Other Sources?

C A S.S.Agarwal, M.Com.,LL.B,

C A S.S.Agarwal, M.Com.,LL.B, (Expert)
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03 July 2011 The stipend is exempted from tax. Kindly go through the following Section 10(14) & 10(16)
An article clerk is not an employee and hence the payment made to him is not taxable as salary

10(14) (i) any such special allowance or benefit, not being in the nature of a perquisite within the meaning of clause (2) of section 17, specifically granted to meet expenses wholly, necessarily and exclusively incurred in the performance of the duties of an office or employment of profit, [as may be prescribed], to the extent to which such expenses are actually incurred for that purpose ;

(ii) any such allowance granted to the assessee either to meet his personal expenses at the place where the duties of his office or employment of profit are ordinarily performed by him or at the place where he ordinarily resides, or to compensate him for the increased cost of living, [as may be prescribed and to the extent as may be prescribed]
Provided that nothing in sub-clause (ii) shall apply to any allowance in the nature of personal allowance granted to the assessee to remunerate or compensate him for performing duties of a special nature relating to his office or employment unless such allowance is related to the place of his posting or residence

10(16) scholarships granted to meet the cost of education;

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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03 July 2011 Stipend is given to the articled assistant to pursue his / her education. So, it can be tax free in view of the following decisions-

If the Stipend granted is for furthering education or gaining knowledge , same can be claimed exempt u/s 10[16] of the Income tax Act,1961 . In this regard the decision of the Karnataka High Court in A. Ratnakar v. Addl. CIT [1981] 128 ITR 527 can be applied.This was also followed by Tribunal in the case of Income-tax Officer v. Dr. G.N. Ramachandran 1 ITD 902.

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