Usually, doctors earn stipend as they pursue a higher degree at a hospital. Such work by the doctor is similar in nature to that of a full-time employee. The doctor is gaining experience from such work and performing duties like regular doctors – in such cases your Stipend may be taxed. Below, Select breaks it down, digging into how summer internship income is taxed and why it might be worth it for summer interns to file a tax return next year, even if they’re not expected to do so. Further, in the judicial decisions discussed above the payment by the employer to the employee for meeting or reimbursing the cost of education is held to be a scholarship which qualifies for exemption u/s 10(16) provided such payment is independent of employment terms.
The Tribunal held that receipt of such amount for giving lectures and royalty are not exempt under Section 10(16) as they are not scholarship granted. The Court observed that the Board has proceeded on a liberal understanding of the provisions of s. Finally, the Tribunal held that scholarship/ stipend received by a student from College for pursuing higher studies cannot be termed as salary and therefore, same would be exempt under section 10(16). The Tribunal after analysis of the terms and conditions, mutually agreed upon in the bond executed between the assessee and the college, found that the bond itself talks about scholarship holders. The assessee was selected for a Government scholarship of Rs. 8,700 for pursuing/studying post graduation course in Government Medical College. In the terms and conditions, words used are qualifying examination and withholding the payment of the scholarship for pursuing further studies.
Is ITR and Tax Audit Due Date Extended till 31.03.2021
Usually, Articles pursuing CA may earn Stipend, or a professor may receive a stipend for carrying on research work. ‘Salary’ received by an ‘employee is taxable in the hands of the employee. Based in Atlanta, Georgia, W D Adkins has been writing professionally since 2008. Adkins holds master’s degrees in history and sociology from Georgia State University. He became a member of the Society of Professional Journalists in 2009. Typically, when one receives monetary compensation for work, that income is taxed at the federal, state and even local levels — there’s a New York City tax for residents, for example.
- Generally companies do not deduct TDS on stipends paid to their interns, but it does not mean that the income would be tax-free.
- This is because a newly hired article would not have enough knowledge and expertise to carry out functions like a full-time practising accountant.
- 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.
- If the deductor does not deduct TDS on the amount of the stipend or does not issue Form no.16, then the stipend is taxable under the head income from other sources based on the nature of training, etc.
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In appeals, it was held that the amount received by the assessee was not in the nature of salary but in the nature of scholarship. The appellate authority held that such income received by the assessee from the USA is exempt under Section 10(16). It is relevant that in the case of CIT vs VK Balchandran 147 ITR 4 the Madras High Court held that grant-in-aid received by the assessee for advance Research in a foreign University falls within the meaning of Section 10(16) of the Income Tax Act and is not taxable. The Court clarified that if the payment is in the nature of remuneration for services rendered, it shall be exigible to Income Tax.
Treated as Salary
Section 10 of the Act enumerates several items of income that are outside the scope and purview of taxable total income. The opening words of section 10 clearly indicate that the items mentioned thereunder undoubtedly bear the stamp of income character, but are, nevertheless, excluded from the computation of taxable income. The Court while deciding the Writ petition, further ordered that no TDS would be attracted in respect of stipend/scholarship paid to PG Students. The Court further directed that if any sum is/ was deducted as TDS from the Stipend, it shall be refunded forthwith to such PG Student. However, as per the Assessing Officer, the amount received by the taxpayer was not a scholarship but an award which did not fall within the ambit of section 10(16). The Assessing Officer further observed that the amount so received by the taxpayer have been partly utilized for the purchase of shares, RBI Relief Bond, NSC and Mutual Fund, the same could not be said to have been given as scholarship and disallowed the taxpayer’s claim.
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What is stipend income?
However, the Tax Department could take a contrary stand that doctors are qualified professionals owing to their MBBS degree and accordingly stipend paid to doctors could partake the nature of salary or professional fees. It could also be contended that when the doctors are is internship stipend taxable in india paid stipend by the hospital, although they are working as part of gaining a higher degree, they are also performing all the duties in the profile of a regular, full-time employee. Their hours are more or less same when compared with a permanent employee at the hospital.
- Right off the bat, it’s important to know that paid interns are employees.
- As such, you do (legally) need to
declare it and report it on your tax return.
- So this remuneration received during an internship will also qualify as salary and thus taxable.
- Despite this, the Tribunal held that the amount received by the assessee was in the nature of salary income and not scholarship and dismissed the appeal of the assessee.
- It includes all other incidental expenses which are incurred for acquiring the education.
Hence, the stipend income earned by these individuals will normally be subject to tax as it is provided for the experience as full-time employees. Research fellowships or grants received from universities are exempt from taxes as they are considered as an aid for further education. A stipend is an amount that is paid to trainees, interns, and students. It is not a salary or wages that is provided by the employer to an employee.
Scholarship received from foreign Institution
Even if the stipend amount is taxable, it is charged either as salary income or income from other sources from which no deduction is allowed for any expenses under the income tax act. The tax treatment of the stipend depends upon the terms and purpose related to such payment. When a person receives a stipend for educational purposes, it can be referred to as a scholarship; hence, no tax shall be levied. For example, in the 2021 tax year the minimum gross income required for single filers — likely to be the filing status for many of my college student peers — was $12,550 for those under age 65. That minimum threshold was also the same if you were single, under age 65 and someone else claimed you as a dependent.
When a stipend is paid to further a person’s education and if it qualifies as a scholarship, then such a stipend is in the nature of a scholarship it shall be exempt. In Dr. G.N. Ramachandran’s case (supra) it was held that the amount received for giving lectures and royalty are not stipend and thus not exempt under section 10(16). In this case, the assessee received stipend as well as an amount for giving lectures and royalty from the National Institute of Health (NIH), Bethesda, Maryland, USA.
How Much to Pay Interns
The stipend amount is predetermined and helps the learner to aid offset certain expenses and acts as a monetary assistance. This amount allows an individual to pursue normally unpaid work by helping defray the living expenses. Efiling Income Tax Returns(ITR) is made easy with Clear platform. Just upload your form 16, claim your deductions and get your acknowledgment number online. You can efile income tax return on your income from salary, house property, capital gains, business & profession and income from other sources.