That ₹15,000 internship stipend feels like pocket money until TDS shows up. The word “stipend” does not decide the tax treatment — your offer letter, duties and tax certificate do.
First identify what you were actually paid for
- Employee relationship: payroll pay is generally salary. Look for Form 16 and salary-style deductions.
- Independent services paid through 31 March 2026: former Section 194J may apply. Its FY 2025-26 annual threshold is ₹50,000; professional services generally use 10% TDS and technical services can use 2%.
- Payments from 1 April 2026: the Income-tax Act, 2025 moves professional and technical service TDS principally to Section 393(1), table item 6(iii). Check the section printed on the current tax certificate instead of copying last year's label.
- A genuine scholarship to meet education costs can be exempt. For income through 31 March 2026 this is former Section 10(16); from 1 April 2026 it is Section 11 read with Schedule II, item 9. Calling service pay a “scholarship” does not make it exempt.
- For FY 2025-26, a resident individual's total income — including special-rate income — must be at most ₹12 lakh for the new-regime 87A rebate. The rebate offsets ordinary slab-rate tax, not tax on special-rate income.
TDS is only tax collected early, not your final bill. Match Form 16 or Form 16A with AIS/26AS. If tax was deducted but your final tax is lower, file the correct ITR to claim the refund.
Do not guess the income head from the payment label. Ask HR which TDS section they used and why, then preserve the offer letter, work scope, payment statements and tax certificate.
The takeaway
Verdict: “stipend” is not a tax category. Classify the relationship first; then calculate tax and claim back excess TDS.