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A Short Guide On Taxes on Stipend | Company Vakil


Taxes formulates on the stipend income has become a subject of debate lately. From a totally factual point of view, the Income Tax Act does not mention anything about “stipend”. The salary that is accepted by the employee has been made taxable under the control of the employee. According to the Section 17 (1), the pension, wages, gratuity, the fees or the profits or the commission in place of salary, the advance salary, the payment made for the leaves which are standing to the credit of the employee – all these are included in the definition of the salary. From this, it is quite evident that the employer and the employee relationship exists due to the concept of salary.

The Income Tax Act has, moreover, formulated that the ‘scholarship granted to meet the cost of education’ has been made exempt from the Income Tax following the section 10 (16). Now the question that arises is that if we take into consideration that the Stipend as ‘Salary’ or as ‘Scholarship’.

In order to know more about this we have to review the conditions by following which such allowance gets paid

when the allowance has been paid to forward the education of a person, we need to examine whether that qualifies as a Scholarship. That person may finish this money totally or he may end up keeping a savings out of some of it – so long gets paid purely with the goal of a person’s education on mind. Moreover, it has to be in the nature of a scholarship; then it shall be exempt. Furthermore, this should not have any relation to the position of the person.

Normally, Articles pursuing Chartered Accounting may earn a Stipend, or any professor may receive salary for the purpose of carrying on some research work. The reason of such a payment is of much value here – and not the significance or the way this has been spent. The fellowships of research, the grants which is received from the universities may all get exempt when their nature is to allow further education.

When the doctors obtain gratuity from the hospitals :

generally the doctors may earn an allowance as they want a higher degree at any hospital. Such work of that nature by the doctor is quite similar to that of a full-time employee. The doctor is gathering experience from those kind of work and he is performing the duties like any regular doctor – in those cases the salary may get taxed.

The MBA graduates or the engineering graduates are eligible to receive the gratuity by going for an internship at any company :

Some companies are going as far as offering an accommodation. The Stipend letter which may or may not have the inclusion of a break up like a salary letter normally does. It cannot be fully said that it will be similar to the employment letter that is offered to, normally, a full time employee. On the flip side, if that payment is made for you in order to gather an experience and to perform the services which are similar to an employee, then the fee income has a possibility to get taxable.

Tax deducted at Source, simply known as TDS on Stipend :

Some companies may opt to not deduct the tax on the allowance; but, it may still remain taxable in your control. It depends upon the nature of the conditions of such a payment.

Tax eligibility under which head :

If the employer has already deduced the tax and issued the employee a form 16, then this will be taxed following the head Salaries. If not, this is generally taxed following the head Income from the other sources.

Expenses are not permitted to be deduced from the Stipend :

It is to be noted that if the employee is earning a salary which has been made taxable, no deduction is permitted for any of the expenses that the employee may have incurred in order to earn the allowance. The employee can save the tax in the form of Section 80 Deductions.

Filing for an Income Tax Return :

If the total income of the employee from all the sources gets more than the minimal income which has been exempt (Rs 2,50,000 for the financial year 2014-15 and Rs 2,00,000 for the financial year 2013-14).

Company Vakil with the help of expert professionals simplifies the process of registrations in India . we are transparent  in quality, process, price and time consumption. Company Vakil follows the likes of famous Just in Time process to deliver services on time without a hitch.


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