Is Stipend Taxable in India? Tax Rules for Interns, Trainees and Research Fellows (AY 2026-27)

Every year, lakhs of interns, CA articles, medical residents, apprentices and research fellows receive a stipend, and almost all of them get the same conflicting advice: "stipend is fully tax-free" from one senior, "no, it is salary" from another. Both answers are wrong as blanket statements.

Whether your stipend is exempt depends on what the money is actually paying for, not on what your organisation calls it. This guide explains the test the Income Tax Act applies, what to do when TDS has already been deducted, and how to report a stipend correctly in your return for AY 2026-27 (FY 2025-26).

The Rule: Section 10(16) and What It Actually Covers

Section 10(16) exempts "scholarships granted to meet the cost of education". There is no monetary ceiling on this exemption, and it does not matter whether the payer is a government body, a university, a trust or a private company.

The critical words are cost of education. Courts and tribunals have consistently applied a single test:

• If the payment is made so that you can pursue an education, training or research programme, and it covers your living and study costs while you do so, it is a scholarship and exempt under Section 10(16).
• If the payment is consideration for work you perform for the payer, it is income for services rendered, and it is taxable as salary or as professional income.

Two smaller points that trip people up:

1. You do not have to spend the entire amount on education for the exemption to apply. If you save part of your fellowship, the saving does not become taxable.
2. Calling the payment a "stipend" instead of a "salary" does not decide the matter. Tribunals have looked past labels in both directions, holding stipends paid to trainee doctors exempt where the payment supported the course, and holding "stipends" taxable where the recipient was effectively doing a job.

Which Category Are You In?

The table below reflects how each arrangement is normally treated in practice. Your own facts, and the wording of your offer or fellowship letter, still control the answer.

If your position sits in the middle, keep the documents that support your reading: the offer letter, the course or training regulations, the fellowship sanction order, and any certificate from the institution describing the payment as support for education.

Read the TDS: It Tells You What the Payer Thinks

The tax your payer deducted is the fastest clue to how the payment has been reported to the department.

No TDS at all. Most institutes paying genuine scholarships and fellowships deduct nothing. This is consistent with an exempt payment, but it is not proof.

TDS under Section 192, with a Form 16. Your payer has treated you as an employee and taxed the stipend as salary.

TDS under Section 194J at 10%, with a Form 16A. Your payer has treated you as a professional or consultant. From FY 2025-26, TDS under 194J applies only once payments to you in the year cross ₹50,000, up from ₹30,000 earlier, so short internships often escape deduction entirely.

Before you file, open your AIS on the income tax portal and check which head the stipend appears under. Filing a return that contradicts your AIS without explanation is the single most common trigger for a mismatch notice. 49Tax reads your Form 16 or Form 16A and your AIS together, so the head of income and the TDS credit line up automatically.

What Tax Will You Actually Pay?

Here is the part most students are not told: even when a stipend is fully taxable, the tax is very often zero under the new regime, which is the default for FY 2025-26.

The basic exemption is ₹4,00,000, and the Section 87A rebate of up to ₹60,000 wipes out the liability for total income up to ₹12,00,000. Salaried recipients also get the ₹75,000 standard deduction.

Example 1: Corporate intern with TDS deducted

Riya interns at a startup for six months at ₹40,000 a month. Total stipend: ₹2,40,000. Because the payments cross ₹50,000, the company deducts TDS under Section 194J at 10%, so ₹24,000 goes to the department and Riya receives ₹2,16,000.

Her total income for the year is ₹2,40,000, well below the ₹4,00,000 basic exemption. Her tax liability is nil, and the entire ₹24,000 comes back as a refund, with interest under Section 244A, but only if she files a return. Nobody refunds TDS automatically.

Example 2: Taxable stipend, treated as salary

Arjun works as a management trainee and receives ₹75,000 a month, taxed as salary.

Arjun's total income is under ₹12,00,000, so the rebate covers his entire liability. Any TDS his employer deducted comes back in full.

Example 3: Exempt fellowship

Meera receives a CSIR JRF fellowship of ₹45,000 a month, ₹5,40,000 for the year, with no TDS. She also earns ₹9,000 of savings bank interest.

The fellowship is exempt under Section 10(16). Her taxable income is ₹9,000, far below the filing threshold. She has no legal obligation to file, but a nil return still carries real benefits when she applies for a visa, a loan or a higher-studies grant.

How to Report a Stipend in Your ITR

If the stipend is exempt under Section 10(16): Report it in the exempt income section of your return, choosing Section 10(16) as the head. Do not simply leave it out. An exempt receipt that shows up in your AIS but nowhere in your return looks like concealment, and it costs nothing to disclose. ITR-1 has a field for exempt income, so most students with an exempt stipend and some bank interest can still use ITR-1.

If the stipend is taxable as salary (TDS under 192): Report it under Income from Salary using your Form 16. ITR-1 works if your total income is up to ₹50 lakh and you have no capital gains beyond the limits it permits.

If the stipend is taxable but you are not an employee (TDS under 194J): You have two defensible routes. Report it as Income from Other Sources if the engagement was genuinely occasional, or as professional income if you were engaged in a consultant capacity. Professional income moves you to ITR-3 or ITR-4, and to presumptive taxation under Section 44ADA if you qualify. For a short one-off internship, Other Sources is usually the cleaner and more accurate answer.

Whichever route you take, claim the TDS credit in the TDS schedule so the refund flows through.

Mistakes That Cost Students Money

Not filing because "stipend is exempt". If any TDS was deducted, the only way to get it back is to file. The window is generous but not unlimited: the return for FY 2025-26 is due by 31 July 2026, with a belated return possible until 31 December 2026.

Assuming every stipend is a scholarship. The exemption is not automatic for interns doing production work. Claiming 10(16) on a plain internship stipend that appears in AIS as professional income invites a query you cannot answer.

Ignoring other income. Savings account interest, fixed deposit interest, mutual fund redemptions and freelance gigs all count. FD interest in particular gets TDS deducted under Section 194A once it crosses ₹50,000 in a year, and students routinely forget it.

Missing advance tax. If your stipend is taxable and no TDS is deducted, and your final liability exceeds ₹10,000, advance tax instalments apply and interest under Sections 234B and 234C follows if you skip them. For most students the rebate keeps the liability at nil, so this rarely bites, but check before you assume.

Forgetting the loan deduction that comes later. Once you start repaying an education loan, the interest is deductible without limit under the old regime. The details are in our guide to Section 80E education loan deductions.

The Takeaway

Ask one question about your stipend: is this money helping me complete a programme of education, or is it paying me for work delivered? The first is exempt under Section 10(16) and belongs in the exempt income schedule. The second is taxable, and under the new regime it almost certainly still results in zero tax for a stipend-sized income.

Either way, if a single rupee of TDS was deducted, file the return. That refund is yours, it is sitting with the department earning you interest at 0.5% a month, and it will not move until you ask for it.