New Hire Stipend Confusion: Can It Include HRA or Travel Allowance?

I am a new hire receiving a stipend. But I am being told that I won't get any HRA, traveling allowance, or any such exemptions on my stipend. Please let me know if a stipend can be divided into HRA, traveling allowance, or any other exemptions.

Stipend is not a salary. HRA and allowances are given on salary. Mostly organizations do not divide stipend. If we divide stipend, then what will be the difference between stipend and salary.

I am paying income tax & PF on my stipend. If stipend cannot be considered as salary, why is it taxed as salary?

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I am paying income tax and PF on my stipend. If a stipend cannot be considered as salary, why is it taxed as salary?

Dear,

If the stipend is 50k per month, why will tax not be deducted? Tax is related to your yearly income. There should not be any deduction of PF on stipend. I feel that what you are receiving is a manipulated stipend.

Regards,
J. S. Malik

Generally, a stipend is paid to short-term trainees who are not employees (mostly summer or winter trainees). Employees on the company's payroll, including trainees, receive salaries with well-defined components. Are you an employee on the company's payroll or on a third-party payroll?

Dear Krutiks,

A stipend is a form of monetary payment for an internship or apprenticeship. A stipend does not have any bifurcations and is a lump sum payment. It may come to you with additional benefits that the organization may provide, such as food, accommodation, travel, etc. However, HR may not entertain your request to bifurcate it into components as is done for permanent full-time employees.

You mentioned you are on probation. So, I presume that post that, you will be confirmed (depending on your performance), and then you will have a salary structure just like other employees.

Regards

Stipend is all about maintaining your day-to-day needs. It is not a salary. Mostly, stipends are too low to be taxed.

Dear Krutiks,

A stipend is a consolidated amount paid for the time and effort you put into the company during training. At this stage, you are not yet productive for them, which is why they are compensating you differently from other employees. Once you start working and become productive, they will adjust your pay accordingly.

Income Tax (IT) and Professional Tax (PT) can be deducted since income calculations are based on your yearly income rather than the mode of income. Provident Fund (PF) deductions may be happening because, as you mentioned being a direct hire currently on probation, they might be considering retaining you in the long term.

Please let me know if you need further clarification on any of these points.

Best regards

No, this can't be done. A stipend is basically given to the new joiner (with the concept to compensate him for traveling allowance, meals, or whatever you say) to sustain him/her on the job. During this period, he receives training and does not completely provide professional services. Once this period is over and after the assessment, management decides if he will be part of the team. Then, the HRA, conveyance allowance, LTA, etc., kick in.

Hello,

On this issue, we have consulted an EPF consultant who is working in the PF Department. According to him, PF is applicable to those employees, even if an employee works for just one day. However, earlier we consulted a Tax Consultant who mentioned that if an employee is in a training period and the company is paying them a stipend, EPF and PT are not applicable to them. This situation is a bit confusing.

Regards,
Suvarna Paranjpe
Pune

Dear Malikji,

I wanted to understand if the stipend is subject to ESI and PF (are these deductions mandatory) or if they can be waived, considering the stipend being paid is Rs. 5000/- a month. This is for interns for a period of 3 - 6 months who have just graduated from college or are still pursuing their education.

Regards,
C J Patel

Dear Malikji,

If someone is paid a stipend as a trainee as per standing orders, then that stipend will not be considered wages for ESI and PF. Similarly, an apprentice appointed through an apprenticeship advisor is also exempted from PF and ESI.

In your query, the student should bring a proper letter from the institute. If you provide a formal letter for the internship, then they should be excluded from ESI and PF.

Regards,
J S Malik

QUOTE=cjpatel;750398
Dear Malikji,

I wanted to understand if a stipend is subject to ESI and PF (are these deductions mandatory) or if they can be waived, especially if the stipend being paid is Rs. 5000/- a month. This is for interns for a period of 3 - 6 months, either just out of college or still pursuing their education.

Regards,
C J Patel[/QUOTE]

Dear,

Stipend is paid to those persons who are not providing direct support to the organization. The organization hires individuals and provides them for social amenities, meaning the appointed person does not have a permanent job and does not have legal rights within the organization.

This is a consolidated amount that includes allowances for traveling, food, lodging, dressing, communication, etc.

The amount given to the candidates goes towards company business promotion and welfare amenities. The PF and ESI departments do not consider this type of income as wages because this stipend is a short-term earning.

You can save tax up to certain extents. Please consult with a tax expert, show actual expenses, and then you can save some amount on your tax.

Best Regards,
Delhi
Sajid

Hi,

If your stipend falls within the taxable income limit, tax will be deducted. Your employer cannot deduct PF on your stipend.

Hi,

A stipend is mainly paid to two different sets of people: interns and trainees. For interns, there won't be any deductions as it's purely meant to meet their daily expenses during their temporary period before returning to their studies. Trainees, on the other hand, have PF deductions as they will potentially be absorbed into the system upon successful completion of their training period.

In your case, the deductions made are correct. They will deduct PF, Income Tax (only if your stipend exceeds the applicable threshold), and Professional Tax. If you are not a direct hire and are under a contract, you won't have PF deductions but will have TDS, PT, and IT deductions.

Feel free to reach out if you need more detailed information.

Regards,
Mohammed S

Stipend is not a salary, and you cannot claim any exemptions such as HRA, conveyance, etc. If you are receiving a handsome stipend, then the entire amount will be taxable as per the Income tax slabs. There are no exemptions allowed.

Thanks and Regards,

Dinesh Bhansali
Email: dinubhansali@gmail.com
Phone: 09892783763

Dear Friends,

In my first job, I received a stipend of 20k with a probation period of 1 year, HRA approximately 7200, Travel allowance of 800, and Basic pay of 12000. I was informed that it was a stipend. I did not have any leaves, no PF deduction, but a professional tax of 200 Rs. was deducted every month. Was it correct?

Regards,
Krish