Is Your Trainee's Stipend Tax-Free? Understanding Income Tax Deductions for Stipends

Dear All,

We are a software company, and we also run a training institute. The trainee students from the institute are working with the company as trainee consultants. These trainees are receiving a stipend. I would like to know whether the stipend paid to trainees is exempt from income tax deductions at the source. For more clarity, I would like to add that the fees paid by the students are properly covered under GST, as AICTE approval is not available for the courses.

Is the stipend concept correct?

If it is correct, up to what amount can it be made?

Thank you.

Dear Ramakant,

The treatment of stipend received by trainees or students as "income" under the Income Tax Act, with the exception of medical students pursuing higher studies, remains a debatable issue. By the way, do the stipends paid to such trainee consultants exceed Rs. 250,000 per annum?

Thank you.

Dear Ramakant,

Since the annual remuneration exceeds Rs 30,000, the disbursement of stipend attracts "Tax Deduction at Source" (TDS) @ 10% under section 194J of the IT Act, 1961. In fact, your accounts department should have educated you on this.

Thanks,
Dinesh Divekar

Hello Divekar Sir,

Since the stipend is payable for 3 months at 8000, I believe no TDS term is applicable.

Regards,
Ramakant