ITAT Delhi Quashes Tax Notice On AMU PG Student's ₹18.34 Lakh Stipend, Declares It Tax-Free Under Section 10(16)

The tribunal held that the payment was connected with her postgraduate education and compulsory residency training, and could not be treated as taxable salary merely because it was received as a stipend.

The ruling was delivered in Snehlata, Rewari v. ITO, Ward-1, Sonipat, ITA No. 5462/Del/2026, for assessment year 2024-25. The order was pronounced on July 30, 2026, by a bench comprising Judicial Member Satbeer Singh Godara.

Income Tax department treated medical student's stipend as salary

Snehlata, a resident of Rewari, Haryana, was pursuing a full-time MS in General Surgery during the relevant financial year. She received ₹18,34,578 from Aligarh Muslim University as a stipend during her postgraduate medical education and compulsory residency training.

She claimed exemption under Section 10(16) of the Income-tax Act, 1961, which covers scholarships granted to meet the cost of education.

The Assessing Officer, however, treated the entire amount as taxable salary. The Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre upheld the addition.

The student subsequently approached the Delhi ITAT challenging the tax treatment.

Why did ITAT Delhi delete the ₹18.34 lakh tax addition?

The tribunal examined the educational purpose of the stipend and its connection with the postgraduate medical course.

It noted that Snehlata was a qualified MBBS doctor pursuing a full-time MS in General Surgery. The ₹18.34 lakh payment had been received from Aligarh Muslim University in connection with her postgraduate medical education and compulsory residency training.

The tribunal relied on an earlier decision of the Chandigarh ITAT in Hiteshi Aggarwal v. PCIT, where a stipend received by a doctor during postgraduate medical studies had been accepted as exempt under Section 10(16).

In that case, the Chandigarh ITAT had held that a stipend received during postgraduate studies could not simply be equated with salary. The Delhi ITAT found the facts in Snehlata’s case to be similar and adopted the reasoning of the earlier decision.

It accordingly deleted the addition of ₹18,34,578 and allowed the appeal.

What is the income tax treatment of scholarships and stipends?

Section 10(16) of the Income-tax Act, 1961, provides an exemption for scholarships granted to meet the cost of education.

However, the Delhi ITAT ruling does not mean that every stipend received by a student is automatically exempt from income tax.

The relevant distinction is between a scholarship intended to support education and a payment that is actually remuneration for employment or services.

A payment does not become tax-free merely because an institution describes it as a stipend or scholarship. Its true purpose and the circumstances in which it is received are important.

In Snehlata’s case, the tribunal treated the payment as an educational stipend because it was connected with her postgraduate medical course and compulsory residency training.

The ruling also illustrates that compulsory practical or clinical training undertaken as part of a professional course does not, by itself, convert an educational stipend into taxable salary.

What the ruling means for students receiving stipends

The decision provides a distinction for students receiving financial support during higher education.

Where a payment is a scholarship granted to meet the cost of education, Section 10(16) may provide an exemption. But where the payment is actually remuneration for employment, professional work or services, it cannot be treated as exempt merely because it is called a stipend.

In Snehlata’s case, the tribunal’s decision turned on the educational character of the payment and its connection with the postgraduate medical course and compulsory residency training.

The Delhi ITAT therefore directed deletion of the ₹18,34,578 addition made by the Income Tax Department.