But just because a person is in college doesn’t mean they have to be an intern. For this we must review the terms under which such Stipend is paid– when Stipend is paid to further a person’s education, we need to test whether it qualifies as a Scholarship. I just learned from my company that they will cut a 10% tax from my stipend every month. According to Anil Melwani, a CPA and partner at accounting firm Tanton Grubman, many interns don’t know how to get a tax refund — or that they even qualify for one. If the amount of stipend is towards support and furtherance of education and not as an employee then the stipend would be exempt u/s 10(16).

The hospital /management will be liable to deduct TDS on such stipend paid, in case where it could come under the head ‘Salaries’ or ‘Professional Income’. Also, from a practical perspective, we have noticed that most hospitals deduct TDS on stipend paid to PG Doctors on a conservative basis to avoid disallowance of the said expenditure. Research fellowships, grants received from universities are exempt since it supports further education.

Here’s how your summer internship income is taxed — and when you can expect a refund

On receipt of the scholarship, it partakes the character of income. Such income of scholarship will be exempt from tax only if it is received to meet the cost of education. An intern who continues to work for you full-time after 90 days may become eligible for benefits. In many cases, however, especially for college students who have less time to work after a paid summer internship is over and they is internship stipend taxable in india have returned to a regular schedule of classes, a continued internship could likely involve less than 30 hours of work per week. Working fewer hours may render the paid intern ineligible to participate in coverage under a group health and welfare plan. As indicated above, paid interns must be paid at least the applicable minimum wage for all hours worked and overtime wages, if they work overtime.

• Such practical training is required to be completed even if the student clears the CA examination during the training period.
• In the past, he worked in EY and comes with wide industry experience from telecom, retail to manufacturing to entertainment where he has handled various national and international assignments.
• The MBA or engineering interns are paid a stipend for performing work similar to that of regular employees in this field.
• Balachandran (supra) and accordingly the ratio of the same could be applied in the instant case as well.
• 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.

It is also not required that the recipient should prove that the amount of scholarship is utilised for the purpose for which it was given. It is also not necessary to spend the entire amount of scholarship receipt. There are judicial precedents wherein stipends paid to doctors have been held as exempt from tax.

ITR Filing Step by Step Guide

The decisions of various courts are presented based on the nature of stipend income so granted to the assessee. Any amount received by the employee from the employer to aid his own studies and research is eligible for exemption under section 10(16). There are a numerous scholarships available to students for studies. The Universities, Colleges, Schools offer scholarship to meritorious students on the basis of their last performance.

Your employer must treat you as a regular employee for tax purposes. This means deducting taxes from your paycheck and paying employer payroll taxes, including unemployment taxes. Since your tenure as an intern is temporary, the length of the internship and any limitations on eligibility for job-related benefits should be spelled out in the contract. The stipend you received for an internship is indeed considered taxable income.

The Student Intern Employee

(4) Fulbright grant described as “maintenance allowance” given to American tutors prosecuting studies in India. The ITAT rejected the contention of the AO and allowed the assessee’s claim for exemption u/s 10(16), holding that the facts and circumstances of this case are similar to the Madras High Court case of V.K. Balachandran (supra) and accordingly the ratio of the same could be applied in the instant case as well. The word ‚education‘ may be used to describe any form of training, any manner by which physical or mental aptitude, which a man may desire to have for the purpose of his work, may be acquired.

Though the payment is made to the children uniformly there is no vested right if the employee to claim the payment. There were instances, though very few, where such a claim has been rejected by the company. A similar decision was rendered by the Ahmedabad Bench of ITAT in the case of  ACIT vs. Girish Saran Agarwal (ITA 293/Ahd/2003) by following the case of V.K. In this case, the assessee received amount being Humboldt Research Award from Alexander Von Humboldt Foundation, Germany. The amount received by the assessee was not fully utilized to meet the cost of education but also for his financial investment i.e. purchase of shares, RBI Relief Bond, purchase of NSC and mutual fund, etc.. The assessee claimed the receipt of the amount as exempt u/s 10(16) treating the same as scholarship for pursuing education.

More Under Income Tax

If the whole object of the payment is to meet the cost of education of a person, then that is enough. No further inquiry is called for in order to exclude the amount from the taxable total income under s. Section 10(16) of the Income-tax Act, 1961 (“Act”) provides that any scholarship granted to a person to meet the cost of education is exempt from tax. Thus scholarships or stipends received for pursuing higher education is always exempt from tax.

Paid intern is effectively just a job title, like engineer or receptionist. Research fellowships, grants received from universities may all be exempt when their nature is to support further education. The person may exhaust this money fully or may end up saving some of it – as long as this has been paid purely in pursuit of a person’s education and is in the nature of a scholarship it shall be exempt. For the next tax filing season, typically mid-January through mid-April, keep in mind that there are services that can help you file a return.

Stipend paid to CA students

Generally companies do not deduct TDS on stipends paid to their interns, but it does not mean that the income would be tax-free. If the company has already deducted tax and the individual has received a Form 16 from the payer, the tax will fall under income from salary. When a stipend is paid as remuneration for services provided while gaining experience, it is considered as salary. Here, the objective of a stipend is not to meet education expenses but to compensate for the duties performed similarly to a full-time employee although it is generally lower pay than salary. If the firm has deducted TDS from your stipend payment, then you are supposed to receive Form 16. In this case, the stipend income is treated as income from salary and is taxed accordingly.

• However, the exemption u/s 10(16) is limited to that part of the scholarships which meets the condition and is not available for other grants though they are provided under the nomenclature of scholarships.
• The Income Tax Act has further laid down that ‘scholarship granted to meet the cost of education is exempt from Income Tax under section 10(16).
• The assessee claimed the receipt of the amount as exempt u/s 10(16) treating the same as scholarship for pursuing education.
• Efiling Income Tax Returns(ITR) is made easy with Clear platform.