No tax for Rs 18.34L stipend; Know why

When Smt Lata, a resident of Rewari, Haryana, received a Rs 18.34 lakh stipend from Aligarh Muslim University for her PG Medical education and residency training, she wisely utilized Section 10(16) tax exemption and did not have to pay taxes. Section 10(16) of the Income Tax Act, 1961 provides a total income tax exemption for any scholarship awarded to a student to cover their education expenses. In this particular case, Smt Lata pursued a PG course in General Surgery at the university.

However, the Income Tax Assessing Officer from Sonipat refused to accept Smt Lata's educational stipend as a tax-free scholarship under Section 10(16). Instead, they classified the stipend as taxable salary, which made the taxpayer liable to pay taxes on it. The Commissioner of Appeals (CIT A) also supported the Assessing Officer's decision and upheld the addition of the stipend to Smt Lata's income. Displeased with the ruling, Lata appealed to the Income Tax Appellate Tribunal (ITAT) in Delhi.

Represented by Chartered Accountant Anirudh Bharadwaj, Smt Lata contested the assessment before ITAT Delhi. After careful consideration, Judge Satbeer Singh Godara passed a ruling on July 30, 2026, in her favor, and she no longer had to pay income tax on the Rs 18.34 lakh stipend received from Aligarh Muslim University. The key reason for her win was that the ITAT Delhi accepted Smt Lata's argument that her stipend was indeed a tax-free scholarship, as it was primarily intended for her education, academic training, and research.

The crux of the dispute was whether the stipend should be treated as remuneration or scholarship. The ITAT Delhi relied on the earlier decision of the Chandigarh Bench in the case of Hiteshi Aggarwal v. PCIT, which held that a stipend received by a doctor during a postgraduate medical course was exempt under Section 10(16). Applying the same reasoning to Smt Lata's case, the Delhi ITAT recognized that her stipend was connected with her postgraduate education and compulsory residency training, and thus, it was eligible for exemption under Section 10(16). This is why she won the case and was relieved of the tax liability.