Tax on scholarship Stipends to students

It was further observed that every payment which is received by a person in the nomenclature of Stipend or Fellowship or even Scholarship may or may not truly be scholarship in the sense of meeting the cost of education. In the case of ITO vs. Dr. V. Ramalinghaswami (1983) 6 ITD 491 (ITAT Delhi) it was held that Scholarship received from a foreign institution to meet the cost of education is fully exempt under section 10(16). The certificate of the concerned foreign institute which gave the scholarship to the assessee, the certificate given by the concerned institute showed that the scholarship was meant to meet the cost of education, etc. On appeal, the AAC held that there was no employer-employee relationship between the institute and the assessee and the grant was not a salary, but a scholarship paid to the assessee for doing research work as a student of mathematics.

Whether you pay an intern more than the applicable minimum wage will depend on the business reasons for doing so, including the market, what you can afford, and your assessment of the value of the work the intern will be performing. The Income Tax Act has further stated that ‘scholarship granted to meet the cost of education is exempt from Income Tax under section 10(16). The information on your tax return, which includes your income, expenses and investments, helps to determine whether or not you’re due a tax return and, if so, for how much. Those who have overpaid state and/or federal taxes in 2022 — or whose employers over-withheld taxes — can expect a tax refund for the amount overpaid once they file their tax return. The tug of war between Doctors and the Income Tax Department has gone on for a very long time regarding the taxability of stipend received by them during their course of training or internship in the hospital as a part of Post Graduate degree programs. In this case the assessee received stipends from National Institute of Health (NIH), Bethesda, Maryland, USA.

No Expenses are allowed to be deducted from Stipend –

This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, legal or tax advice. If you have any legal or tax questions regarding this content or related issues, then you should consult with your professional legal or tax advisor. Save taxes with Clear by investing in tax saving mutual funds (ELSS) online. Our experts suggest the best funds and you can get high returns by investing directly or through SIP. Download Black by ClearTax App to file returns from your mobile phone.

I have
full confidence that this method will work for your tax return, too. Just substitute the stipend income total you have from your own personal records for the
$3,000 used in the
demonstration example. The good news is that, although your stipend income is
taxable as ordinary income, at least you do not have to pay Social Security and
Medicare taxes on it, as you would if the income were alternatively
taxed as ordinary W-2 wages. Failure to deduct TDS does not exempt the tax liability in the hands of the payee, accordingly, even if TDS is not deducted by the hospital, the stipend income could be disclosed under the head ‘Income from Other Sources’ while filing the personal tax returns. It was noted that the payment was not paid to serve the interests of the grantor and also that students undergoing PG Course were not allowed to do private practice or part time job during the entire period of study.

I received a stipend for an internship i did. They said its taxable where do enter the amount in turbo tax

For example, the stipend might be paid to enable you to complete school-related research while any work you do is unpaid. There are, therefore, two considerations, which, altogether, make up the concept of a scholarship for meeting the cost of education within the meaning of Section 10(16). One is that the scholarship is a payment intended to be an income receipt in the hands of the scholar. The other one is that whatever is paid is intended to make the cost of education of the recipient. The question whether the quantum of the payment is adequate or inadequate or is or is not, in excess of requirements are beside the point.

He claimed that the grant-in-aid received by him from the Princeton Institute was to be excluded from his taxable income under s. All the aforesaid documents clearly point that the assessee got the scholarship/ stipend as provided exempted under s. 10(16) of the Act, for pursuing higher studies, therefore, it cannot be termed as a ‘salary’ as provided under s. Right off the bat, it’s important to know that paid interns are employees. “Paid intern” isn’t a separate employment class with different rules to follow.

Treated as Salary

(6) Financial assistance to teachers in the universities for undertaking research of learned work in science subjects and humanities. Join our newsletter to stay updated on Taxation and Corporate Law. The Revenue should not deny the benefit of the benevolent Provisions of  the Income Tax where the provision is clear like the aforesaid Section 10(16).

If scholarships are given for such a purpose, it cannot matter whether the recipient is of Indian origin or is of a foreign origin. However, it has been held in various judicial decisions that stipend, if given to meet the cost of education while pursuing an educational course, comes under the purview of section 10(16) and is exempt from tax. The term ‘scholarship’ has been interpreted liberally to also include within its scope and ambit, amounts of fellowships, stipends, grants for travel and incidental expenses, etc. awarded for acquiring education. A stipend received for meeting the cost of education is also treated as a scholarship within the meaning of Section 10(16) of the Income Tax Act. The scholarships are generally meant for meeting the cost of current education but sometimes it is awarded as an incentive to achievement in academics, sports and co-curricular activities.

A Guide to Depreciation Rates as per Income Tax for AY 2020-21

Thus, the stipend paid in such cases clearly came under the term ‘scholarship’ and was declared eligible for exemption. As stated earlier, a stipend is paid for the rendering of services. However, these services shall not constitute an employer-employee relationship or any principal-agent relationship rather, must be rendered in the course of acquiring education or knowledge so as to qualify for a scholarship and consequent exemption u/s 10(16). Thus any allowance granted to meet the cost of education is exempt under section 10(14)(i). The exemption provided in section 10(14)(i) read with Rule 2BB is more specific exemption for meeting the cost of education than taxing the same as perquisite which is general in nature.

So this remuneration received during an internship will also qualify as salary and thus taxable. In the case of doctors receiving stipends at hospitals while they pursue a higher is internship stipend taxable in india degree, the scenario is similar to a salary. Here, they are performing duties like regular full-time doctors and at the same time gaining experience in their respective fields.