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Stipend for Postgraduate Doctors Taxable, Scholarships Exempt: Income Tax Department Clarifies (in 2024)
The Income Tax Department has issued a clarification regarding the taxability of income earned by doctors pursuing postgraduate studies. In response to an RTI query filed by an applicant, Sh. Aman Kaushik, the Income Tax Officer of Ward-36(1), New Delhi, outlined the conditions under which different forms of income are taxed.
According to the official response, stipends received by doctors during their postgraduate studies are taxable as ‘Salaries’ under Section 15 of the Income Tax Act, 1961. However, scholarships awarded to postgraduate students fall under Section 10(16) and are exempt from tax.
The department further clarified that if a doctor engages in medical practice while pursuing postgraduate education, any income earned from such practice will be taxed as ‘Profits and Gains from Business or Profession’ under Section 28 of the Act.
The clarification aims to address ongoing confusion about the tax treatment of financial support received by doctors during their training. The Income Tax Department emphasized that applicants can file an appeal if they are not satisfied with the information provided.
But what does Chief Commissioner of Income Tax (TDS), Bengaluru says (in 2017):
The document, issued by the Income Tax Department, clarifies that stipends paid to post-graduate medical students are considered scholarships under Section 10(16) of the Income Tax Act.
As a result, these stipends are exempt from income tax, and there is no requirement for medical colleges to deduct tax at source (TDS) from such payments. This clarification reinforces that the stipend serves as financial support for educational purposes rather than taxable income, thereby reducing the financial burden on students pursuing postgraduate medical education.
“I am, therefore, of the considered opinion that stipend paid to post-graduation students by the Medical College shall be of the nature of scholarship mentioned in section 10(16) of the I.T. Act and accordingly exempt from income tax. There is no liability on the part of the Medical College to deduct tax from such payments.”
However, this clarification has sparked confusion among doctors, as income tax is governed by central law, not state law. This raises concerns about the lack of uniformity in the interpretation of tax rules across the country. Medical activists are now questioning why stipends are considered ‘salary’ in some cases and ‘scholarship’ in others, despite the same legal framework applying nationwide.
The Medical Bulletin
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