Is the Stipend Received by PG Medicos Taxable? Delhi IT Dept Issues Clarification, but Adds to More Confusion

New Delhi: Replying to a recent Right to Information application filed by a doctor, the Delhi Income Tax Officer has clarified that stipends received by doctors while pursuing postgraduate medical courses are taxable as "Salaries" under Section 15 of the Income Tax Act 1961.

However, instead of providing clarification on the matter, the RTI response has added to more confusion a 2017 response by the Bengaluru Chief Commissioner of Income Tax, which has now gone viral, mentioned that that stipend would be in the nature of scholarship granted to meet the cost of education and therefore would be exempt under section 10(16) of the IT Act.

What does the 2017 Notification Say?

The clarification on the taxability of the PG medical stipend was provided by the Bengaluru Chief Commissioner of Income Tax while responding to a letter from the Principal of Mysore Medical College.

In the said letter, the Mysore Medical College Principal had sought to know whether the stipend paid to students doing postgraduation was liable for deduction of tax at source or if it was exempted under Section 10(16) of the IT Act.

"I have examined the issue and I am of the opinion that the stipend would be in the nature of scholarship granted to meet the cost of education and shall therefore be exempt u/s 10(16) of the IT Act. That being so, there is no liability to deduct tax at source from such stipend paid to the students doing post graduation in the medical college," the Bengaluru Chief Commissioner of Income Tax had mentioned in its response dated 03.02.2017.

"There have been various Court decisions on this issue all of which are unanimous in holding that such stipends are exempted u/s 10(16) of the IT Act," the response further mentioned, adding that there is "no liability on the part of the Medical College to deduct tax from such payments."

Clarification Issued by Delhi Income Tax Office:

The Office of the Income Tax Officer, New Delhi recently offered clarification on the matter after Dr. Aman Kaushik filed an RTI application seeing an explanation about the taxability of the doctors pursuing post-graduation.

In response to these queries, the Delhi IT Officer clarified that stipends received by doctors while pursuing postgraduate medical courses are taxable as "Salaries" under Section 15 of the Income Tax Act, 1961. As per the IT Office, while scholarships received for postgraduation are exempt from tax, stipends received by PG Medicos are taxable. Further, it mentioned that the income earned from a doctor's practice is also taxable.

The IT Office informed on 03.12.2024, "The stipend received during post-graduation is taxable as 'Salaries' under Section 15 of the Income Tax Act, 1961."

"Scholarships received for post-graduation are exempt from tax under Section 10(16) of the Income Tax Act, 1961," it mentioned, further adding that "If the doctor is practicing medicine during post-graduation, the income earned from practice is taxable as 'Profits and Gains from Business or Profession' under Section 28 of the Income Tax Act, 1961."

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Such contradictory responses add to confusion for the doctors as different States have different takes on the taxability of the stipend received by the PG medicos during their postgraduate medical training.

Dr. Kaushik who filed the RTI application informed Medical Dialogues had he had filed the RTI before the Union Health Department seeking to know whether the PG stipend was taxable. This query was transferred to several departments. While PGI Chandigarh did not give any proper clarification on the matter, JIPMER said that stipend is taxable.

"There is a lot of confusion on the matter. Income Tax is a central law and not a state law. Therefore, the rule should be uniform everywhere across the nation. Why they are considering stipends as 'salary' at one place and 'scholarship' at another?" he said.