Stipend vs Salary: Tax, PF and ESI for Interns

Companies take on interns, trainees and apprentices every year, and payroll teams have to decide how to pay them: stipend or salary, with or without PF and ESI, with or without TDS, and with what kind of payslip. The answer depends less on the word used in the offer letter than on who the person is and what they do. This guide explains the difference between stipend and salary, the rules for apprentices, interns and trainees, how stipends are taxed, and how to run them through payroll. For salary components, see our salary structure guide.

What is a stipend?

A stipend is a fixed amount paid to someone during a period of training, education or research. It is meant to cover living costs while the person learns, not to pay the full market value of their work. Stipends are usually paid monthly, as a single figure, without basic, HRA or other allowances, and without increments or bonus.

People who usually receive stipends include apprentices, company interns, graduate and management trainees, medical interns, articled CA students and research fellows.

Stipend vs salary

The key point is substance, not label. If a "trainee" does the same work as regular staff, for the same hours, under the same supervision, labour inspectors and tax authorities may treat them as an employee and the stipend as wages or salary, whatever the offer letter says.

Apprentices under the Apprentices Act

Apprentices engaged under the Apprentices Act, 1961, through the apprenticeship portal and a registered contract, are trainees, not workers. The main rules:

• Minimum stipend: set by the Apprenticeship Rules by qualification. After the 2025 revision, which followed the Central Apprenticeship Council's May 2025 recommendation of about a 36% increase, the range is about ₹6,800 to ₹12,300 a month, with ₹12,300 for graduate apprentices, effective 11 September 2025 (Class 5–9: ₹6,800; Class 10: ₹8,200; Class 12: ₹9,600; diploma: ₹10,900; graduate: ₹12,300) (TeamLease on NAPS).
• Government share under NAPS: 25% of the prescribed minimum stipend, up to ₹1,500 a month, paid directly to the apprentice by DBT. The employer pays the rest.
• NATS: for graduate and diploma apprentices under the National Apprenticeship Training Scheme, the government shares 50% of the prescribed minimum.
• Payment date: the stipend for a month is paid by the 10th of the following month, through the bank.
• No deduction for leave: no deduction is made for periods of casual or medical leave allowed under the rules.
• No PF or ESI: apprentices with a contract registered on the apprenticeship portal are excluded from "employee" under section 2(26) of the Code on Social Security, so no PF or ESI applies; the Skill Development Ministry confirmed this in an office memorandum of 21 October 2026. Apprentices engaged under standing orders are covered. Because Apprentices Act apprentices are not employees, they are generally not counted towards coverage thresholds.
• No job guarantee: the employer is not bound to employ the apprentice at the end of training, unless the contract says so.

See our ESI guide and PF guide for coverage rules.

Interns and trainees

Interns and trainees who are not engaged under the Apprentices Act fall into a grey area. Labour laws do not have a separate category for them, so their treatment depends on the facts:

• Academic internships: a student doing a short internship required by their course, mainly to learn, with a modest stipend, is generally not treated as an employee.
• Work-based internships and trainees: a graduate who joins as a "trainee" and does regular work for the business, for months, is more likely to be an employee in substance. PF and ESI may then apply if wages are within the limits, and the Code on Wages may require at least the minimum wage.
• Probationers: employees on probation are employees, even if called trainees; their pay is salary.

Before excluding a trainee from PF and ESI, record why: the person is an apprentice under the Apprentices Act, or a student on a course-linked internship. Where in doubt, cover them; contributions on a modest stipend are small, and missed contributions attract interest and damages.

Is stipend taxable?

• Stipend for work or training: taxable. Where there is an employer-employee relationship, it is salary and TDS is under the salary provisions. Otherwise it is taxed as income from other sources.
• Scholarship: a scholarship granted to meet the cost of education is exempt (section 10(16) of the 1961 Act, now Schedule II, item 9 read with section 11 of the Income-tax Act, 2025). A university fellowship for study is an example; a company internship stipend is not.
• Most interns pay no tax: a stipend of ₹15,000 a month is ₹1.8 lakh a year, well below the level at which tax arises in the new regime, where the rebate makes tax nil on income up to ₹12 lakh.
• TDS: where the stipend is salary, TDS is worked out on the estimated annual income and is usually nil for interns. Where the intern is not an employee, the stipend is not salary and is not normally a fee for professional or technical services, so TDS often does not apply. Deduct TDS as professional fees only where the intern actually provides professional or technical services above the threshold.

Our TDS on salary calculator shows whether any tax arises.

Stipend vs CTC: an example

Take a stipend of ₹15,000 a month. For an apprentice engaged under the Apprentices Act, the cost to the employer is ₹15,000, less up to ₹1,500 a month of NAPS support paid by the government, and there is no PF, ESI or gratuity. If the same ₹15,000 is paid as salary to a trainee who is an employee, the employer also pays 12% PF (₹1,800) and ESI at 3.25% (₹487.50), and provides for gratuity, so the cost to company is higher; the trainee's take-home falls by employee PF (₹1,800) and ESI (₹112.50). That is why the classification matters for budgets as well as compliance.

Medical and other regulated stipends

Some stipends are set by regulators rather than employers. Medical interns and resident doctors receive stipends fixed by the state government or the institution, under the NMC stipend rules (CRMI Regulations, 2021), which require interns to be paid a stipend as fixed by the appropriate authority; the amounts differ by state and institution. Articled CA students receive stipends at minimum rates set by ICAI; a proposed increase was issued only as a draft in June 2026. In these cases, the regulator's rules decide the minimum.

How to pay a stipend through payroll

1. Classify the person: apprentice under the Apprentices Act, course-linked intern, or trainee who is an employee in substance.
2. Issue the right document: an apprenticeship contract on the portal, an internship letter, or an appointment letter. Our internship offer letter format can help.
3. Set the amount: at least the prescribed minimum for apprentices, or at least the minimum wage where a trainee is an employee.
4. Set up in payroll: a separate pay group with a single "stipend" earning, and statutory deductions switched on or off by classification.
5. Pay on time: by the 10th of the next month for apprentices, and within the wage payment deadlines for employees.
6. Issue a stipend slip: showing the period, days, stipend, any deductions and net pay.
7. Year-end: issue a TDS certificate (Form 130 under the Income-tax Act, 2025) where TDS was deducted, and keep attendance and payment records.

Stipend slip format and template

A stipend slip can follow your normal payslip layout with fewer lines:

• ☐ Name, ID, programme (apprenticeship, internship, trainee) and period
• ☐ Days in month, days attended, leave taken
• ☐ Stipend amount, and government DBT share if any (shown for information)
• ☐ Deductions, if any (TDS; PF and ESI only where applicable)
• ☐ Net stipend paid, payment date and bank reference

See our guide to the salary slip for the full layout.

Common mistakes

• Calling regular employees trainees for months to avoid PF, ESI and minimum wages.
• Paying apprentices below the prescribed minimum or after the 10th of the next month.
• Deducting PF and ESI from Apprentices Act apprentices, who are excluded.
• Treating every stipend as tax-free scholarship when it is paid for work.
• No written letter or contract, which leaves the classification open to dispute.

Frequently asked questions

What is a stipend?

A stipend is a fixed amount paid to an intern, trainee, apprentice, student or researcher during a period of training or study. It is meant to support the person while they learn, rather than to pay for the full value of work, and it usually has no allowances, bonus or increments.

What is the difference between stipend and salary?

Salary is pay for work done by an employee under an employment contract, with allowances, benefits and statutory deductions. A stipend is paid during training or study, usually a fixed amount without allowances. The label does not decide the law: if a trainee works like an employee, labour and tax laws may treat the stipend as wages or salary.

Is stipend taxable?

A stipend paid for work or training with an employer is taxable, as salary where there is an employer-employee relationship, or otherwise as income from other sources. A scholarship granted to meet the cost of education is exempt. Most interns pay no tax because their total income is below the taxable limit, and the new regime gives a rebate up to 12 lakh rupees of income.

Is PF deducted from stipend?

Not for apprentices engaged under the Apprentices Act, 1961, who are excluded from the definition of employee. For other interns and trainees, PF and ESI depend on whether they are employees in substance; a trainee who works for the establishment for a stipend may be covered, so check before excluding them.

Who gets a stipend?

Apprentices under the Apprentices Act, interns at companies, management and graduate trainees, medical interns, articled CA students, research fellows and some government trainees receive stipends. The rules and amounts differ for each group.

What is the minimum stipend for apprentices?

The Apprenticeship Rules set a minimum monthly stipend by qualification. After the 2025 revision, the range is about 6,800 to 12,300 rupees a month, with 12,300 rupees for graduate apprentices. Under NAPS the government pays 25% of the prescribed minimum, up to 1,500 rupees a month, directly to the apprentice.

Position as of 15 November 2026, under the Apprentices Act, 1961 and Apprenticeship Rules as amended in 2025, the Code on Social Security, 2020, the Code on Wages, 2019 and the Income-tax Act, 2025. Stipend rates and scheme support change; check the apprenticeship portal for current figures. General information, not legal or tax advice.