What Is A Stipend? Types of Stipend & How Stipend Works with Examples

Apart from salaries or in addition to salaries, organizations might provide individuals with other types of compensation. One such type of compensation is a stipend. But what is a stipend exactly? Jump into this article to learn more about the stipend, its different types, eligibility criteria, and more. 

What Is a Stipend?

A stipend is a fixed amount received by individuals at a specific interval for their services. Stipends are often given to cover the commuting costs of unpaid interns. Additionally, it is available for volunteers at NGOs. 

Organizations also offer stipends to cover the business-related expenses of employees. Usually, employers offer stipends on a weekly or monthly basis to help employees cover basic living expenses, like accommodation and transportation. 

How do Stipends Work?

The stipend allowance of an individual is determined by the employer with no minimum wage requirements. Usually, the cost of living and related expenses and the type of work or training help determine the stipend amount. While understanding “what is a stipend,” you should know that you might be able to negotiate the amount if it fails to meet your basic needs. 

Special Considerations

After understanding “what is a stipend,” you should know certain important considerations about it. For instance, students and interns usually receive stipends that are not taxable. But if the organization sees you as an employee, your stipend might be taxable. In that case, you might receive the entire stipend amount because the organization will deduct a chunk of it. 

Types of Stipends

Now that you are familiar with “what is a stipend,” you should learn about some of its types:

Academic Research Stipends

You are likely to receive academic research stipends or grants for offering research services in a specific field. Usually, you will receive a stipend from a third-party organization dependent on the research data to ensure that you can complete the research without financial restrictions. For instance, you might get stipends as a researcher when your project requires books, scholarly articles, translations, and more. 

Expenses

This form of stipend is available for bearing the cost of certain expenses. For instance, students can receive stipends for buying a laptop for educational purposes. Another example of this type of stipend is companies reimbursing employees for transportation costs. 

Career Training

Some businesses offer stipends to help cover the fees or time you invest in appropriate training. For instance, if you take a training course, the organization can pay you a stipend to cover your expenses. Additionally, if you need to pay for the training out of your own pocket, you might be given a stipend.

Volunteering

You will usually not receive any salary for voluntary services. But you can be eligible for a stipend. For instance, you are bearing expenses to voluntarily help people in other locations by traveling to those locations. In that case, you might receive a stipend for your travel, accommodation, and fooding costs. 

Wellness Programs

Some employers offer stipends to help you pay for gym or yoga class memberships. At times, you might also get stipends for several health and fitness expenses included in a wellness program. Wellness programs can often include services for meal planning. 

Eligibility Criteria for Receiving a Stipend

While understanding “what is a stipend,” you should know that there are certain eligibility criteria to fulfill for getting it. You will usually be eligible for stipends when you fulfill the following eligibility criteria:

• You are undergoing training or education at a different organization than your workplace.
• You are not employed as a salaried individual somewhere. 
• You have an agreement with your employer that you won’t get a guaranteed job offer after the internship.
• You are working at an organization for a specific period, and you agree to offer your services in exchange for a small payment. 

Stipend Examples

A real-world example might help you to better understand “what is a stipend.” Professional development stipends are becoming quite popular. For instance, Apple reimburses employees for formal educational expenses associated with advancing their careers at the company. The company even covers the tuition for pursuing education programs for career development. 

Stipend FAQs

How Is a Stipend Different From a Salary?

A salary is usually given to employees according to the number of days or hours they are working. But a stipend does not take into account such factors. Unlike salaries, stipends don’t come with minimum wage requirements. 

Is a Stipend Considered Income?

Stipends fall under the income of individuals getting it. 

How often are stipends paid?

The frequency of stipends paid to an employee will depend on the organization and the contract terms.

Is a stipend taxable?

Employers don’t deduct tax from stipends because it is not considered as salary. However, employees have to pay tax on their incomes, and stipends fall under the income of an individual. 

How does an honorarium differ from a stipend?

Employees or trainees usually receive stipends regularly for a certain period. But, honorarium payments are given out according to cases, and they are not recurring. 

Does an internship stipend require you to file an income tax return (ITR)?

Stipend is considered as income, which means you have to file it in your ITR.