Got a stipend while studying? ₹18.34 lakh ITAT case explains when students can claim income-tax exemption

A postgraduate medical student received ₹18.34 lakh as a stipend from Aligarh Muslim University, but the Income Tax Department treated it as taxable salary. The Delhi ITAT held that the stipend was linked to her education and compulsory residency training and allowed the Section 10(16) exemption.

A postgraduate medical student received ₹18.34 lakh as stipend from Aligarh Muslim University while pursuing an MS in General Surgery. The Income Tax Department treated the amount as taxable salary, but the Delhi Income Tax Appellate Tribunal (ITAT) has deleted the addition, holding that the stipend was connected with her postgraduate education and compulsory residency training.

The ruling is important for students receiving stipends during higher education because the fact that a payment is called a stipend does not by itself determine its tax treatment. What matters is whether it is a scholarship granted to meet the cost of education, as covered by Section 10(16) of the Income-tax Act, 1961.

The ruling came in Snehlata, Rewari vs ITO, Ward-1, Sonipat, ITA No. 5462/Del/2026, for assessment year 2024-25. The order was pronounced on 30 July 2026 by the Delhi ITAT.

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

Snehlata claimed exemption under Section 10(16), treating the amount as an educational scholarship or stipend.

The Assessing Officer did not accept this treatment and treated the entire ₹18,34,578 as taxable salary. The first appellate authority, the Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre, also upheld the addition.

Snehlata then approached the Delhi ITAT. The appeal was heard by judicial member Satbeer Singh Godara, with the order pronounced on 30 July 2026.

The Delhi tribunal examined an earlier decision of the Chandigarh ITAT in Hiteshi Aggarwal v. PCIT.

In that case, a medical doctor pursuing postgraduate studies had received ₹8.61 lakh as stipend. The Chandigarh ITAT had accepted the claim for exemption under Section 10(16), holding that the 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. It noted that there was no dispute that she was a qualified MBBS doctor pursuing a full-time MS (General Surgery). The tribunal also recorded that the ₹18.34 lakh was received from Aligarh Muslim University for pursuing postgraduate medical education and the compulsory residency training attached to the academic programme.

The tribunal therefore adopted the reasoning of the earlier Chandigarh Bench decision and deleted the ₹18,34,578 addition.

The appeal was consequently allowed.

Section 10(16) provides an exemption for scholarships granted to meet the cost of education.

The Snehlata ruling does not mean that every stipend received by a student is automatically exempt from tax. The nature of the payment and the purpose for which it is given remain important.

In the Delhi ITAT's reasoning, the relevant circumstances were that the recipient was a postgraduate medical student and the stipend was connected with her academic programme and compulsory residency training. The tribunal therefore treated the payment as a scholarship or educational stipend rather than taxable salary.

This distinction is particularly relevant for professional courses where students may undertake practical or clinical training as part of their education. The presence of such compulsory training does not, by itself, mean that the amount received during the course must be treated as salary.

The earlier Hiteshi Aggarwal ruling also involved postgraduate medical education and a stipend treated as a scholarship. The Chandigarh tribunal had noted that the payment was made during the postgraduate course and accepted the Section 10(16) exemption after examining the relevant facts and documents.

The Delhi ITAT order provides a useful distinction for students receiving financial support during higher education.

If the payment is a scholarship granted to meet the cost of education, Section 10(16) may provide an exemption. But a payment that is actually remuneration for employment or services cannot become tax-free merely because the institution calls it a “stipend” or “scholarship”.

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. It therefore directed that the ₹18.34 lakh addition made by the tax department be deleted.

Kirti Jha is a Senior Content Producer at Mint, where she writes on mutual funds, taxation, personal finance and macroeconomic developments. Her reporting focuses on helping readers understand complex financial developments through data-driven, research-backed stories that explain how policy changes, market trends and regulatory decisions affect investors and households. <br><br> Before joining Mint, Kirti worked at ET Money, where she specialised in mutual fund research and investment analysis. She tracked portfolio disclosures, fund manager strategies, sectoral allocation shifts and investment trends, distilling large datasets into investor-focused insights. Her work combined quantitative analysis with consumer-centric storytelling, enabling readers to better understand fund positioning, portfolio changes and long-term investment opportunities.<br><br> Kirti holds a Bachelor's degree in Economics from Indraprastha College for Women, University of Delhi, and a Master's in Finance from the Jindal School of Banking & Finance at O.P. Jindal Global University. Her academic training emphasised analytical thinking, quantitative research and financial decision-making, providing a strong foundation in understanding capital markets, financial systems and economic policy. With a combined experience in investment research and financial journalism, she is committed to producing accurate, accessible and insightful journalism that empowers readers to make well-informed financial decisions.