A resident Indian went abroad for study of MBA course from a foreign university. After 6 months he came back in India for 3 months internship with an Indian company. The Indian company is paying stipend to him @ 15K per month. What would be the treatment of the same as per Income Tax Act. Pl. also mention is there any professional tax payable on the same.
18 May 2010
Stipend would be treated as salary. Since the stipend is paid for 3 month. total stipend will be Rs.45000/- per annum which is below the taxable income limit. Hence tds is not applicable. Profession tax of Rs.200 per month will be deducted.
19 May 2010
The section 10(16) is specifically for scholerships, internship is not a scholership but a kind of payment in the nature of salary, taxable under section 17.
19 May 2010
I would like to differ here with the above experts.
1) How can we treat stipend as salary? If it is a part of the MBA course just like we do CA articleship, the Employer-employee relation will not be there. And in that case it would not be treated as salary.
2) Rather it will be taxable as income from other sources.
3) Exemption u/s 10(16) is specifically for scholorships. In the case CIT Vs V.K.Balachandran (1984) 147 ITR 4 (Mad). as referred above, the 2 questions of law were whether the stipend was income & whether it is exempt under sec 10(16) to which the learned judges replied first in affirmative & later in negative.
With due respect I would like the experts to thinkover & if I m wrong kindly enlighten me.
CAclubindia
