A student pays income tax only if total taxable income crosses the basic exemption limit (₹4 lakh under the default new regime, FY 2025-26). Even above that, the Section 87A rebate makes tax nil up to ₹12,00,000 of taxable income. Scholarships for education are fully exempt under Section 10(16), and pocket money from parents is not income. Company internship stipends and freelance earnings are taxable — but most students still owe nothing and file an ITR only to claim back TDS.
Student Income Types — Tax Treatment
The common ways a student earns or receives money, how each is taxed for AY 2026-27, and the relevant section of the Income-tax Act, 2025.
| Income / Receipt | Tax Status | Rate | Notes |
|---|---|---|---|
| Scholarship for education | Exempt | Nil | Section 10(16) · no upper limit |
| UGC / CSIR / ICMR fellowship | Exempt | Nil | Academic research fellowship |
| Pocket money / gift from parents | Not income | Nil | Gift from relative — not taxable |
| Company internship stipend | Taxable | Slab | Salary or professional fees |
| Freelance (tutoring, coding, design) | Taxable | Slab | 44ADA presumptive available |
| YouTube / blog / creator income | Taxable | Slab | Business / professional income |
| FD / savings interest | Taxable | Slab | Add to total income |
| Listed shares / equity MF gains | Taxable | 20% / 12.5% | STCG 20% · LTCG 12.5% |
| Crypto / VDA gains | Taxable | 30% | Flat 30% + 1% TDS |
Rates reflect FY 2025-26 (AY 2026-27) under the Income-tax Act, 2025. The new regime is the default; verify on the official portal before filing.
If your only real income is a scholarship, pocket money and a small stipend under ₹12 lakh a year, your income tax is almost certainly nil under the new regime. The real reason to file an ITR is to recover any TDS that a company, bank or platform deducted from your stipend, interest or freelance pay.
New Regime Slabs & the ₹12 Lakh Rebate
For AY 2026-27 the new regime is the default. After the Section 87A rebate, a resident individual pays zero tax up to ₹12,00,000 of taxable income (about ₹12.75 lakh salary/stipend after the ₹75,000 standard deduction). Students rarely cross this, so tax is usually nil.
| Taxable Income (New Regime) | Rate |
|---|---|
| Up to ₹4,00,000 | Nil |
| ₹4,00,001 – ₹8,00,000 | 5% |
| ₹8,00,001 – ₹12,00,000 | 10% |
| ₹12,00,001 – ₹16,00,000 | 15% |
| ₹16,00,001 – ₹20,00,000 | 20% |
| ₹20,00,001 – ₹24,00,000 | 25% |
| Above ₹24,00,000 | 30% |
Section 87A rebate makes total tax nil where taxable income is up to ₹12,00,000. Plus 4% health & education cess. Old regime (2.5L nil / 87A up to ₹5L) is optional.
Want the exact number for your income? Run it through our calculator.
Open Income Tax Calculator →Is Scholarship Income Taxable?
No. A scholarship granted to meet the cost of education is fully exempt under Section 10(16), with no upper limit. It does not matter whether it comes from the government, a college, a trust or a foreign body — if the purpose is education, the whole amount is tax-free and need not be added to total income.
- Central / State government scholarships — exempt.
- Merit and need-based scholarships from colleges / universities — exempt.
- UGC, CSIR, ICMR and similar research fellowships for academic study — exempt.
- Foreign scholarships for study abroad — exempt when granted to meet the cost of education.
The exemption is for education. A private company's internship "stipend" is not a scholarship — it is pay for work and is taxable. Likewise, an amount labelled a scholarship but paid purely as a living allowance unrelated to education cost can be treated as taxable income.
Got a scholarship plus a stipend and unsure what's taxable?
Ask a Tax Expert →Is Internship Stipend Taxable?
It depends on the nature of the stipend. A stipend genuinely paid to support academic study or training can qualify for the Section 10(16) exemption. But most corporate internship stipends are pay for work and are taxable — either as salary or as professional fees.
| Type of Stipend | Taxable? | TDS | Head of Income |
|---|---|---|---|
| Fixed monthly stipend like a salary | Yes | Sec 192 (if it crosses limit) | Salary |
| Tech / consulting internship (fees) | Yes | Sec 194J @ 10% (if > ₹30K) | Profession |
| Stipend to support academic study | Exempt | — | Sec 10(16) |
| Govt / research fellowship (study) | Exempt | — | Sec 10(16) |
If TDS is deducted but your total income is below the taxable limit, you file an ITR to get the full amount refunded.
Companies often deduct 10% TDS on stipends under Section 194J. If your yearly income is under ₹12 lakh, your actual tax is nil — so the whole TDS comes back as a refund once you file your return and it is reflected in your Form 26AS / AIS.
Stipend TDS shown in your Form 26AS? Let us file and recover it.
Claim TDS Refund →Tax on Student Freelance Income
Tutoring, content writing, app development, design and similar work is professional income. Under the presumptive scheme in Section 44ADA, if gross receipts are within the limit you can declare just 50% as profit — so ₹4 lakh of freelance income becomes only ₹2 lakh of taxable profit.
Freelance under 44ADA
Stipend + scholarship
- File ITR-4 for presumptive 44ADA, or ITR-3 if you keep regular books.
- Pay advance tax only if your net tax after TDS exceeds ₹10,000 in the year.
- GST registration becomes relevant only once turnover crosses ₹20 lakh.
Tax on Stocks & Crypto for Students
Many students invest small amounts. Gains on listed shares and equity mutual funds have their own rates, while crypto is taxed at a flat rate regardless of income.
| Gain Type | Holding | Rate |
|---|---|---|
| STCG on listed equity | < 12 months | 20% |
| LTCG on listed equity | > 12 months | 12.5% above ₹1.25L |
| Intraday / F&O | — | Slab rate |
| Crypto / VDA gains | Any | 30% flat + 1% TDS |
STCG 20% and LTCG 12.5% apply to listed equity from 23 July 2024. LTCG up to ₹1.25 lakh a year is exempt.
Traded stocks or crypto this year? Get the capital-gains maths right.
Open Capital Gains Calculator →Should a Student File an ITR?
Filing is mandatory once total income (before deductions) crosses the basic exemption limit. Below that it is optional — but filing is strongly worth it whenever tax has been deducted at source.
You should file if
- TDS was deducted on stipend, interest or freelance pay
- You want to claim a refund of that TDS
- You have capital gains from shares, MF or crypto
- Total income is above the basic exemption limit
Filing is optional if
- Only income is exempt scholarship / pocket money
- No TDS was deducted anywhere in the year
- Total income is well below the exemption limit
- You have no gains or refund to claim
- PAN card
- Form 16 (if stipend as salary)
- Form 16A (TDS on fees / interest)
- Form 26AS & AIS
- Bank statement / interest certificate
- Broker capital-gains statement
- Scholarship / fellowship letters
- Freelance invoices & receipts
Filing early builds a clean tax record — useful later for education loans, visas and your first full-time job. For most students the return is simple: report the taxable stipend/freelance income, keep the scholarship exempt, and recover any TDS as a refund.
Want us to file your student ITR and recover your TDS?
Get ITR Filing Help →Frequently Asked Questions
Related TaxClue services
Student With a Stipend, Freelance or Trading Income?
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