For Students Taxes on Scholarships/Stipend

Information on For Students Taxes on Scholarships/Stipend

There are various scholarships available for students to continue their studies. The schools, Colleges, and colleges provide scholarships to meritable students on the base of their last performance. Some NGOs additionally award scholarships to indigent and poor students to pursue their studies. Some Old Boys Associations additionally award certain scholarships. The Central/State Government additionally awards differing types of scholarships on the idea of past achievements, and financial status based on quota for reserved, backward & the disabled.

The scholarships are usually meant for meeting the value of current education however generally it’s awarded as an incentive for excellence in academics, sports, and co-curricular activities. Some scholarships are awarded for a wonderful performance, like topping within the school/college or grading the highest marks in an explicit subject. The scholarships are generally utilized for functions aside from education or the scholarship awarded is utilized once at a particular interval of your time.

In straightforward terms, ‘scholarship’ suggests a grant that has been achieved on the idea of the tutorial or different accomplishments to support a student’s education. Thus, it has to be discovered whether or not the number received as a Scholarship is vulnerable to be taxed below the provisions of the Income Tax Act. it’s pertinent that any quiet scholarship granted to a student to satisfy the value of education is exempt below Section 10(16) of the Income Tax Act. Section 10(16) of the Income Tax Act reads as under:

Incomes are not enclosed in total financial gain.

10. In computing the whole financial gain of a previous year of someone, any financial gain falling inside any of the subsequent clauses shall not be included—

(16) Scholarships are granted to satisfy the price of education;

 Therefore, if any student gets a monthly scholarship or a payment scholarship or a regular payment and therefore the same is utilized to satisfy the price of education then a similar isn’t rate able below the Income Tax Act.

 The benevolent Provisions of section 10(16) exempt any scholarship granted to satisfy the price of education. Thus, any scholarship received by worthy students to satisfy the price of education is exempted from Income Tax in terms of section 10(16) of the Income Tax Act. The sole condition of the exemption is that the scholarship amount given ought to be wont to meet the education expenses. The entire scholarship amount granted to satisfy the price of education is exempt and there’s no higher limit prescribed for exemption below the Income Tax Act.

 The subsequent scholarships/Stipend is exempt u/s 10(16) of the Income Tax

1. Any quantity received by the worker from the employer towards the scholarship of his children is eligible for exemption below section 10(16).

2. Any quantity received by the worker from the business owner to help his own studies and analysis is eligible for exemption below section 10(16).

3. Research Fellowships working in all fields,

An important question arose before the ITAT within the case of Income-Tax Officer vs Dr. V. Ramalingha swami 1983 6 ITD 491 Delhi wherever the question arose was whether or not the exemption granted in instructional fee of wards of lecturers finding out within the same faculty exempt u/s 10(16) of IT Act. The ITAT command that the same scholarship clearly fell below section 10(16) and is exempt from the levy of Income Tax

A regular payment received for meeting the price of education is additionally treated as a scholarship among the means of Section 10(16) of the Income Tax Act.

it might be banal to see the case of Ratnakar Rao vs ACIT 128 ITR 527 whereby it had been commanded by the Mysore state supreme court that the regular payment paid by the Hospital for securing coaching, study & analysis in an exceeding branch of medication is within the nature of Scholarship and falls below the extent of Section 10(16) of the Income Tax Act and is so not dutiable.

 It’s relevant that within the case of CIT vs VK Balachandran 147 ITR 4 the Madras state High Court command that grant-in-aid received by the assessee for advance analysis in an exceedingly foreign University falls among the that means of Section 10(16) of the Income Tax Act and isn’t dutiable. The Court processed that if the payment is within the nature of remuneration for services rendered, it shall be eligible for income Tax

The Revenue shouldn’t deny the advantage of the benevolent Provisions of the Income Tax wherever the availability is obvious just like the aforementioned Section 10(16).

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