Report Of the Law on Stipends:

 What Is Salary?

The term "wages" has been defined to mean all remuneration capable of being expressed in terms

of money which would, if the terms of the contract of employment express or implied were

fulfilled, be payable to a person employed in respect of his employment or work done in such an

employment and includes house rent allowance but does not include: - Section 2 Clause (h)

MWA

“wages” means all remuneration (whether by way of salary, allowances or otherwise) expressed

in terms of money or capable of being so expressed which would, if the terms of employment,

express or implied, were fulfilled, be payable to a person employed in respect of his employment

or of work done in such employment, and includes – Section 2 (vi) POWA

 What is a stipend?

No law in India defines stipend but it is considered as renumeration for services provided whilst

gaining experience. The stipend will come under the purview of IT act depending on the

purpose that the stipend was given for. 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 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. (IT act 10 (16))

  Types of Stipends:

Stipend as Scholarship: Research fellowships, grants received from universities may all be

exempt when their nature is to support further education.

Stipend as a Salary – Any stipend that is rewarded for the purpose that falls under the provision

of salary i.e., wages under the PWA and MWA acts will be tax deductible either by the company

or other means. As per section 80 any stipend that may be taxed, no deductions are allowed for

any expense incurred to receive the stipend.

o Is it mandatory to file ITR for stipend income?

If your total income from all sources is more than the minimum income which is exempt (Rs

2,50,000 for FY 2018-19).

 Income for Foreign Nationals?

Foreigners in India can be exempted form tax under certain exception:

 Remuneration received from a foreign enterprise for services rendered in India, provided

his stay in India does not exceed 90 days during a previous year. [Sec.10(6)(vi)] (3))

 Stipend for Foreign Nationals? (As per tax law)

(i) at special rates on income from dividends (not subjected to additional income-tax u/s 115-o),

interest and capital gain from units of mutual funds/UTI, bonds, Global Depository Receipts and

shares, royalty or fees for technical services. [Sec.115A and 115A]

(ii) at special rate of 10% in respect of gross receipts 0 sportsman for his participation in India in

a game or sports from advertisement or contribution of articles, and income sports association.

[Sec.115 BBA]

(iii) at normal rates on other incomes.

Besides, if they have investment income or long-term capital gains from any foreign exchange

asset, they shall be eligible to the special provisions of Chapter XII-A.

1. An Employee is any person who is employed for hire or reward to do any work, skilled

or unskilled manual or clerical, in a scheduled employment in respect of which minimum

rates of wages have been fixed – Section 2 Clause (I) MWA

2. The term "wages" has been defined to mean all remuneration capable of being

expressed in terms of money which would, if the terms of the contract of employment

express or implied were fulfilled, be payable to a person employed in respect of his

employment or work done in such an employment and includes house rent allowance but

does not include: - Section 2 Clause (h) MWA

The value of:

a) Any house accommodation or supply of light, water and medical attendance; or

b) Any other amenity or any service excluded by general or special order of the

appropriate Government;

c) Any contribution paid by the employer to any personal fund or provident fund or

under any scheme of social insurance;

d) Any travelling allowance or the value of any travelling concession;

e) Any sum paid to the person employed to defray special expenses entailed on him

by the nature of his employment; or

f) Any gratuity payable on discharge.

3. Under Section 17(1) IT Act – Wages, pension, gratuity, fees or commission or profits in

lieu of salary, advance salary, payment for leaves standing to the credit of the employee –
 have all been included under the definition of salary. It is evident when a salary is paid

– an employer-employee relationship exists.

4. IT Act 10 (16) - scholarships granted to meet the cost of education;

5. “wages” means all remuneration (whether by way of salary, allowances or otherwise)

expressed in terms of money or capable of being so expressed which would, if the terms of

employment, express or implied, were fulfilled, be payable to a person employed in

respect of his employment or of work done in such employment, and includes – Section 2

(vi) POWA

6.