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Taxability Of Stipend Received by an Article

Sarveshwar Lahoty (Consultant) (54 Points)

01 February 2008

I wanted to know that the Stipend Received by an Article Assistant is Taxable or Exempt

If it is Taxable, Then under which Head of Income it should be taken

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17 Replies

(Guest)

Stipend Received By Student is taxable under the head Income from Salaries.But genrally it does not Exceed Basic Exemption Limitof Income Tax.

(Guest)

Stipend Received By Student is taxable under the head Income from Salaries.But genrally it does not Exceed Basic Exemption Limitof Income Tax.

MOHIT MAHAJAN (LCS, ACA) (2050 Points)
Replied 02 February 2008

For any sum to be taxable under head salary it is necessary to have employer-employee relationship. Since no such relation exist between a ca and article assistant hence it can't be taxed u/h salary.

CA. Amit Daga (Finance Controller CA. CS. CFA. CIFRS. M.COM. ) (9017 Points)
Replied 02 February 2008

Whether the stipend paid to trainee is taxable if taxable under which section or head of income... Stipend may be taxable or may not be taxable based on the fact of the case. First visit the scope of total income which is defined in section 5 of the Act. It says "5. (1) Subject to the provisions of this Act, the total income of any previous year of a person who is a resident includes all income from whatever source derived which (a) is received or is deemed to be received in India in such year by or on behalf of such person ; or (b) accrues or arises or is deemed to accrue or arise to him in India during such year ; or (c) accrues or arises to him outside India during such year " Thus all receipts are taxable unless exempt expressly under the I T Act. Stipend is not expressly exmept under the Act. Thus Stipend is certainly taxable income if it is purely being given in form of cost of living or as wages or salary or for any purpose but studies . However, if the Stipend granted is for furthering education or gaining knowledge , same can be claimed exempt u/s 10[16] of the I T act . 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 case of Income-tax Officer v. Dr. G.N. Ramachandran [1 ITD 902]

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CA. Amit Daga (Finance Controller CA. CS. CFA. CIFRS. M.COM. ) (9017 Points)
Replied 02 February 2008

Sarveshwar if you interperate the prov than you find it that if you rec stipend due to your study purpose (articleship) you are exempted u/s 10(16) of the income tax act, Otherwise you are not exempted .

Dhara (CA) (204 Points)
Replied 02 February 2008

MR. GURKIRAT SINGH, HOW CAN U SAY THAT GENERALLY IT DOES NOT EXCEED THE MAXIMUM AMOUNT NOT CHARGEABLE TO TAX.
MINIMUM STIPEND RATES ARE SPECIFIED BY INSTITUTE & NOT MAXIMUM SO ANY CA CAN GIVE MORE THAN THAT . AND ANOTHER THING CONSIDER ANOTHER CASE WHERE ARTICLE HAS CLEARED CA FINAL BEFORE COMPLETING HIS/HER ARTICLESHIP. ARTICLESHIP IS PENDING FOR 6 MONTHS.IT HAPPENS NOW. SO IT IS POSSIBLE THAT HE/SHE RECEIVES STIPEND & THEREAFTER SALARY WHICH MAY EXCEED MAXIMUM AMOUNT NOT CHARGEABLE TO TAX RIGHT?

1 Like

Gagandeep (Article) (24 Points)
Replied 03 February 2008

The IT Act says in lucid language that the income is charged under the head Income from salaries if the employer - employee relation exists and in case of stipend the article is deemed to be the employee of the CA as per Form 102

CA Chaitanya (PRACTISING CA) (4283 Points)
Replied 03 February 2008

It is taxable under the head salary.

CA. Amit Daga (Finance Controller CA. CS. CFA. CIFRS. M.COM. ) (9017 Points)
Replied 17 February 2008

Dhara sahab this is true stipened can be anything but that amt will not be taxable be acc to case of Karnataka High Court in A. Ratnakar v. Addl

1 Like

M.Sriram Shenoy (CA Final) (814 Points)
Replied 17 February 2008

Stipend received by an articled clerk is NOT NOT NOT TAXABLE............. huffffff

Ajeet (CA) (239 Points)
Replied 18 February 2008

Scholarship granted to meet the cost of education is exempted u/s 10(16).
In “Sudhir Kumar” case, the ITAT Jaipur bench has held that the stipend received by articled clerks from a CA is in the nature of scholarship and hence exempted. This may help you.

CA. Dashrath Maheshwari (TaXpert) (15090 Points)
Replied 28 May 2009

Exemption under Section 10(16) would be available only in respect of the scholarships granted to meet the cost of education. It cannot be said that the stipend either from the firm of Chartered Accountants or from other industry, are scholarships granted to meet the cost of education. No exemption would therefore be available under Section 10(16). The sum received by way of stipend, which is a revenue receipt, would be chargeable to tax.

Question is that under which head would it be taxable? the answer lies in whether in the case of article training or industrial training, a employer-employee relationship is created. As in the course of apprenticeship or industrial training, no relationship of employer and employee is created in the manner as understood for taxability under the head salaries, the amounts received would be taxable under the head, `Income from Other Sources.' Deduction for expenses incurred to earn the income can, however, be claimed under Section 57.

saurabh (CA) (552 Points)
Replied 01 June 2009

stipend recieved by an article clerk is a revenue receipt, and it would be chargeable to tax u/h Income from other sources as no empl'r-empl'ee relation is there in b/w a principal CA and an article . It is the scholarship amt u/s 10(16) which is not chargable to tax.