Income Tax applicability on Stipend given to Medical College PG students, Income Tax

[TCR Advanced]

Sirs,

Does Stipend granted to post-graduate Medical Students attract Income Tax?

Posts / Replies

[Ramanathan Seshan]

As outlined in various interpretations of the Income Tax Act, the distinction between a stipend as a ‘scholarship’ and a stipend as ‘salary’ continues to generate confusion. Given that the legislation does not explicitly define the term stipend, the classification often hinges on the contractual agreements between the institutions and the recipients.

Particularly for doctors receiving stipends during their postgraduate training, there are multiple judicial precedents suggesting that such payments can be considered scholarships and thus exempt from taxes, provided the agreements clarify their purpose. However, as you may be aware, the tax authorities might view these stipends as salaries, especially when the work done correlates closely with that of regular employees at the institution. I invite your attention to the following case law:

• Rahul Tugnait (Dr.) vs. ITO - 2008 (6) TMI 229 - ITAT CHANDIGARH-B - The ITAT, Chandigarh SME Bench, held that the stipend received by a student pursuing his post graduation (‘PG’) at a medical college be termed as scholarship and exemption under section 10(16) of the Act is to be allowed.

Regards,

S Ram