Is TDS Deducted on Intern Stipend? Employer Rules

Last updated: 23 October 2026 · By the Asuraa Team

Quick answer: TDS on an intern's stipend depends on how the payment is treated. If the intern works under your control, the stipend is generally salary, and TDS under section 392 of the Income-tax Act, 2025 is deducted only if estimated annual income is taxable, so most interns attract nil TDS. If you pay an independent professional fee instead, the section 393 table applies 10% TDS once payments cross Rs 50,000 a year.

Key takeaways

• The Income-tax Act has no separate rule for stipends, so an employer must first decide whether the payment is salary, a professional fee or an education grant.
• Under the Income-tax Act, 2025, salary TDS is in section 392 (old section 192) and is deducted at the average rate on the intern's estimated income for the year.
• The section 393 table sets TDS on professional fees at 10% and on technical fees at 2%, each with a Rs 50,000 threshold, according to the Income Tax Department.
• The e-filing portal's AY 2026-27 slab table shows nil new-regime tax up to Rs 4,00,000 and a rebate of up to Rs 60,000 where taxable income does not exceed Rs 12,00,000.
• For a typical supervised intern on a modest stipend, the salary route usually means nil TDS, but the employer should still collect PAN and keep records.

TDS on an intern's stipend depends on what the payment is in law. If the intern works under your direction like a junior staff member, the stipend is generally treated as salary, and you deduct tax under the salary provision only if the intern's estimated income for the year is taxable, which for most interns it is not. If you pay a freelancer-style intern a fee for professional services, the TDS rules for professional fees apply, with a threshold of Rs 50,000 a year. A grant paid purely to support education can be exempt. This guide gives Indian employers a rule table, worked examples and a checklist under the Income-tax Act, 2025, which applies from 1 April 2026. It is part of our employer compliance basics.

This is general information, not tax advice.

Is TDS applicable on stipend paid to interns?

TDS applies on an intern's stipend only when the payment falls under a TDS provision and crosses the relevant limit. The Income-tax Act does not have a separate rule for the word "stipend", so the employer has to decide which category the payment falls into:

• Salary: an intern who works under your control, on fixed hours, with a monthly stipend, usually fits here. TDS under the salary provision is calculated on the intern's estimated total income for the year, so a modest stipend often attracts no TDS.
• Fee for professional or technical services: an independent person who delivers a defined piece of work, sets their own methods and invoices you looks more like a professional than an intern.
• Scholarship for education: a payment made purely to meet the cost of a student's education, without work in return, may be exempt.

According to ClearTax's explainer on stipends, a stipend paid for work similar to an employee's is taxable, and where tax is deducted and a salary certificate is issued it is reported under salaries, while payments made only to further education may be exempt. Our guide on whether an intern is an employee under Indian law explains how to judge the relationship.

Which sections apply under the Income-tax Act, 2025?

From 1 April 2026, salary TDS sits in section 392 (the old section 192), and most other TDS on payments to residents is consolidated into the table in section 393. A TaxGuru TDS master sheet for the 2025 Act maps section 392 to the old section 192 and describes salary TDS as deducted at the average rate on estimated income, with no fixed threshold. The Income Tax Department's page on section 393 sets out the table for payments to residents.

The section 393 rates and thresholds above are from the Income Tax Department's page as of October 2026. ClearTax lists scholarships as an item in Schedule II, which covers income not included in total income under the 2025 Act; check the exact conditions before relying on it.

How does salary TDS work for a typical intern?

Under the salary route, you estimate the intern's taxable income for the year, work out the tax on it, and deduct that tax evenly across the months you pay. For most interns the answer is zero, because the stipend is low and the internship is short.

The e-filing portal's slab table for AY 2026-27, which covers income earned in FY 2025-26, shows the new regime charging nil tax on income up to Rs 4,00,000 and a rebate of up to Rs 60,000 where taxable income does not exceed Rs 12,00,000. Check the rates for the tax year in which you pay before you compute.

Illustration (example only, new regime, no other income):

If the intern has other income, such as a previous job in the same year, the estimate changes. Ask interns to declare any other salary in the year so your estimate is accurate. For background on how the new regime works for young earners, see our guide to the new tax regime for salaried freshers.

What should employers do before paying stipends?

Set the treatment once, document it and apply it consistently. A practical sequence:

1. Decide whether the internship is employment-like, an independent professional engagement or an education grant, and write the reason down.
2. State the treatment in the internship letter: the monthly amount, payment date and that tax will be deducted where applicable.
3. Collect the intern's PAN and bank details before the first payment.
4. For the salary route, estimate annual income at the start, ask about other income in the year, and recompute if the stipend or duration changes.
5. For the professional-fee route, track aggregate payments to each person in the year against the Rs 50,000 threshold.
6. Deposit any tax deducted and file TDS returns on time, then issue the TDS certificate to the intern.
7. Keep the letter, attendance or deliverables and payment records together for each intern.

Salary TDS certificate forms have been renumbered under the 2025 Act; our explainer on Form 16 under the new Income-tax Act covers the change.

What do most guides on TDS on stipends get wrong?

Most guides answer with one rule: either "stipend is not taxable" or "deduct 10% under the professional fees section". Both are often wrong. A stipend is not exempt just because of its name; if the intern works for you, it is generally taxable income in the intern's hands. Equally, putting a full-time intern under the professional-fees section because it is easier to administer can misstate the relationship and deduct tax from someone whose income would otherwise be below the taxable limit, leaving them to claim a refund.

The better approach is to start from the relationship, then pick the provision. For a typical supervised intern on a modest stipend, the salary route usually means you deduct nothing but still keep proper records. For a genuine freelancer billing deliverables, the professional-fee route with its Rs 50,000 threshold is the right fit.

Do the labour and tax answers have to match?

They should be consistent, because both look at the same facts. If you treat an intern as a salaried person for tax, it is hard to argue they are not working under your control for labour purposes, and the reverse also holds. Decide the nature of the internship once, using our guide on setting intern stipends and the employee-status guide linked above, and keep your paperwork aligned.

This is general information, not tax advice. Rates, thresholds and form numbers change; confirm them on the Income Tax Department's website or with a tax professional before you pay.

Related guides

• HR Compliance Basics for Indian Startups Hiring Their First Team
• Is an Intern an Employee Under Indian Labour Law?

FAQ

Is stipend taxable in India?

A stipend paid for work is generally taxable in the intern's hands, whatever it is called. If the intern works under the employer's control, it is usually treated as salary. A payment made only to meet the cost of education, without work in return, may be exempt as a scholarship. In practice, many interns pay no tax because their total income is below the taxable limit.

Under which section is TDS deducted on an intern's stipend?

If the stipend is treated as salary, TDS falls under section 392 of the Income-tax Act, 2025, which replaced section 192 from 1 April 2026. If the intern is an independent professional paid a fee, the section 393 table applies, with 10% on professional fees above Rs 50,000 a year. The correct section depends on the working relationship. This is general information, not tax advice.

Do I need to deduct TDS on a Rs 10,000 monthly stipend?

If the stipend is treated as salary and the intern has no other income, usually not. Rs 10,000 a month for a full year is Rs 1,20,000, which is within the nil slab of Rs 4,00,000 shown on the e-filing portal's new-regime table for AY 2026-27. Confirm current rates and ask the intern about other income in the year.

Can an employer deduct 10% TDS on all stipends to be safe?

That is not a safe default. Applying the professional-fee rate to a supervised intern misstates the relationship and deducts tax from someone whose income may be below the taxable limit, leaving them to claim a refund. Decide whether the payment is salary, a professional fee or an education grant, and apply the matching provision consistently.

Is a stipend paid to a student exempt as a scholarship?

It can be, if it is paid purely to meet the cost of education rather than in return for work. Scholarships appear among exempt incomes in Schedule II of the Income-tax Act, 2025, which corresponds to the old section 10(16). A stipend for an internship where the student does work for the company is generally not a scholarship. Check the exact conditions.

What records should employers keep for intern stipends?

Keep the internship letter stating the stipend and tax treatment, the intern's PAN and bank details, attendance or deliverables, payment records, and any TDS deposits, returns and certificates. Note the reason you chose salary or professional-fee treatment. Consistent records make it easier to answer questions from the intern or the tax department later.

Final thoughts

Start from the relationship, not the label: a supervised intern's stipend usually follows the salary rules and often needs no TDS, while a genuine freelancer's fee follows the section 393 table. Document the choice and keep records. When you are ready to hire interns or freshers, you can post roles on Asuraa jobs.