New Delhi. The Income Tax Appellate Tribunal in Delhi has ruled that a ₹18.34 lakh stipend received by a postgraduate medical student during her course and compulsory residency training was exempt from income tax under Section 10(16) of the Income Tax Act, 1961. The tribunal rejected the Income Tax Department’s treatment of the payment as taxable salary and directed that the addition of ₹18,34,578 to her income be deleted.
The taxpayer was pursuing a postgraduate degree in General Surgery at Aligarh Muslim University when she received the stipend. She treated the amount as a scholarship granted for educational purposes and claimed exemption under Section 10(16).
The Income Tax Assessing Officer in Sonipat, however, took the view that the payment represented salary rather than an exempt educational scholarship. The amount was consequently added to her taxable income. The Commissioner of Appeals subsequently upheld the assessment, prompting the student to approach the Delhi tribunal.
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Tribunal Examines Purpose of the Stipend
The dispute centred on whether the stipend was primarily connected with the taxpayer’s education or represented payment for services rendered.
Section 10(16) provides an exemption for scholarships granted to meet the cost of education. The nature of a payment, rather than the terminology used to describe it, is relevant while determining whether it qualifies for the exemption.
A payment described as a stipend, fellowship or research grant may qualify for exemption when its principal purpose is to support education, academic training or research. However, if the payment is effectively remuneration for employment or professional services, it may be treated as taxable income.
In the present case, it was undisputed that the taxpayer was a full-time postgraduate medical student pursuing MS in General Surgery and that the stipend was received during the course of her studies and compulsory residency training.
Earlier Medical Stipend Ruling Considered
Judicial Member Satbeer Singh Godara heard the appeal and delivered the order on July 30, 2026. In deciding the matter, the tribunal considered an earlier ruling of the Chandigarh Bench in Hiteshi Aggarwal v. PCIT.
In that case, a stipend received by a doctor during a postgraduate medical course had been accepted as exempt under Section 10(16). The earlier tribunal had examined the nature and purpose of the payment and concluded that a stipend linked to postgraduate medical education could not automatically be treated as salary.
The Delhi tribunal followed the same reasoning. It noted that the stipend in the present case was connected to the taxpayer’s postgraduate education and the compulsory residency that formed part of the course.
The fact that the student performed practical or clinical duties during the programme did not, by itself, establish that the stipend arose from a conventional employer-employee relationship.
₹18.34 Lakh Addition Ordered to Be Deleted
The tribunal ultimately accepted the taxpayer’s claim that the stipend was educational in nature and qualified for exemption under Section 10(16).
It found that the ₹18,34,578 payment had a direct connection with her postgraduate medical studies and mandatory residency training. On that basis, the tribunal directed the Income Tax Department to delete the amount that had been added to her taxable income.
The ruling reinforces the distinction between educational stipends and payments made in return for employment or professional services. The tax treatment of such payments depends on their actual purpose and the circumstances in which they are received, rather than solely on whether they are described as stipends, scholarships or fellowships.
About the author — Suvedita Nath is a science student with a growing interest in cybercrime and digital safety. She writes on online activity, cyber threats, and technology-driven risks. Her work focuses on clarity, accuracy, and public awareness.
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