Income Tax for Students — Scholarship, Internship & Freelance
Updated: 3 June 2026 | Income-tax Act 2025 | Section 10(16)
Students pay income tax only if total income exceeds ₹3 lakh (new regime). Scholarship is fully exempt under Section 10(16). Internship stipend from companies: taxable. Freelance income: 50% deemed profit under Section 44ADA. Parents' pocket money: NOT income.
Section 10(16)
Scholarship for education is fully exempt — no limit. Covers govt scholarships, merit awards, research fellowships.
Company internship stipend ≠ scholarship — taxable. Below ₹3L income in new regime: zero tax. File ITR if TDS deducted to claim refund.
Company internship stipend ≠ scholarship — taxable. Below ₹3L income in new regime: zero tax. File ITR if TDS deducted to claim refund.
Student Income Types — Tax Treatment
| Income Type | Tax Status | Section |
|---|---|---|
| Scholarship for education | Fully Exempt | Section 10(16) |
| UGC/CSIR/ICMR fellowship | Fully Exempt | Section 10(16) |
| Company internship stipend | Taxable (salary/professional) | Section 15 / 28 |
| Freelancing (tutoring, coding) | Taxable at slab rate | 44ADA / 28 |
| YouTube / blog monetization | Taxable as business income | Section 28 |
| FD interest | Taxable at slab rate | Section 56 |
| Capital gains from shares/MF | 20% STCG / 12.5% LTCG | Section 111A / 112A |
| Parents' pocket money / gift | NOT income — not taxable | — |
| Loan/scholarship from institution | Not taxable (not income) | — |
Frequently Asked Questions
Do students need to pay income tax in India?
Students must pay income tax if their total income exceeds the basic exemption limit: New tax regime: ₹3,00,000 per year. Old tax regime: ₹2,50,000 per year. Age 60+: ₹3,00,000. Common income sources for students: Internship stipend, freelance income (tutoring, coding, content writing), investment returns (FD interest, capital gains from stocks). Money received from parents as allowance/pocket money: NOT income — not taxable. Scholarship for education purposes: EXEMPT under Section 10(16). Most full-time students earning below ₹3L: no tax, but may still need to file ITR to claim TDS refund.
Is internship stipend taxable?
Internship stipend taxability depends on nature: If stipend is regular fixed monthly pay (like salary): taxable as "Salary" income. Employer must deduct TDS under Section 192 if stipend is significant. If stipend is meant to cover living expenses/training (scholarship-like): may qualify for Section 10(16) exemption if for academic training. Lump-sum fellowship/research stipend from educational institutions: often exempt. CSIR/ICMR/UGC fellowships: exempt under Section 10(16). Company internship stipends (tech/consulting): generally taxable — treated as professional fees; TDS at 10% under Section 194J if >₹30K. TDS deducted → student can claim refund if income < threshold.
Is scholarship income taxable in India?
No — scholarship for education is FULLY EXEMPT under Section 10(16): Scholarships from Central/State Government: exempt. Merit scholarships from educational institutions: exempt. Foreign scholarship for study abroad: exempt (for education purposes). Scholarship received to meet cost of education: fully exempt, no limit. Research fellowships (if for academic research): exempt. However, if scholarship exceeds actual education cost and becomes a living allowance beyond normal: taxable portion is income. Distinction: stipend for internship/job training from private companies ≠ scholarship; company stipend is taxable. Key: is it for education/academic purposes? If yes: Section 10(16) exemption.
How should a student earning freelance income pay tax?
Student freelance income (tutoring, content writing, app development, graphic design): Tax treatment: Professional income under Sections 28-44. Presumptive scheme (Section 44ADA): if annual gross < ₹75L, 50% deemed profit. So ₹3L freelance = ₹1.5L taxable income → below ₹3L threshold → no tax. If gross > ₹75L: regular books + audit. File ITR-4 for presumptive or ITR-3 for regular books. Advance tax: if tax liability > ₹10,000 after TDS. GST: mandatory registration if annual turnover > ₹20L. Deductions: internet, laptop depreciation, software subscriptions can be claimed as business expenses.
What is the tax on stock market investments by students?
Capital gains tax for student investors: Short-term capital gains (STCG) on listed equity (held <1 year): 20% flat rate (Budget 2024 change from July 23, 2024). Long-term capital gains (LTCG) on listed equity (held >1 year): 12.5% on gains above ₹1.25L per year. Intraday trading: treated as speculative business income — taxed at slab rates. FnO trading: non-speculative business income — slab rates. If total income < ₹3L: no tax (87A rebate covers STCG too for income ≤₹7L). TDS on crypto: 1% TDS on transactions > ₹50K on exchanges. Crypto gains: 30% flat tax regardless of holding period.
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