My employer's trust paid my daughter's college fees and called it a scholarship, and separately I received a cash award from a State Government for community work. Is either of these taxable, and does it matter that no approval was mentioned?
The two clauses ask different questions and only one of them looks for an approval. Clause (16) of section 10 exempts 'scholarships granted to meet the cost of education'. There is no approval requirement in it, no ceiling, no condition about who the grantor is, and no requirement that the whole of the scholarship be spent. What it does require is that the payment be a scholarship and that it be granted to meet the cost of education. Clause (17A) exempts 'any payment made, whether in cash or in kind,— (i) in pursuance of any award instituted in the public interest by the Central Government or any State Government or instituted by any other body and approved by the Central Government in this behalf; or (ii) as a reward by the Central Government or any State Government for such purposes as may be approved by the Central Government in this behalf in the public interest'. Approval by the Central Government is required in two places there: for an award instituted by a body other than the Central or a State Government, and for the purposes for which a reward is given by the Central or a State Government.
Decided by the CBDT Circulars & Instructions (Not applicable — statutory text), reported as Section 10(16) and section 10(17A) of the Income-tax Act, 1961, as amended up to 2023. It bears on section 10(16), section 10(17A), section 17(2), section 15 of the Income Tax Act 1961, in Capital Gains Exemptions and Salary & Perquisites matters.
These two clauses are short enough to be misread as unconditional, and each has a condition hiding in plain sight. Clause (16) has one: the payment must be a scholarship, granted to meet the cost of education. Everything else that people expect to find there is absent. There is no approval, no ceiling, no requirement that the grantor be a government or a recognised institution, and no requirement that the money be spent down to the last rupee. An officer who taxes the unspent balance of a scholarship is adding a condition the clause does not contain. The real fight on clause (16) is at the other end, over what the payment is. Where an employer, or a trust the employer funds, pays the fees of an employee's child, the Department will say the receipt arises from the employment and is a perquisite, and the answer will turn on the terms on which it was granted — whether there was a scheme, whether it was open beyond the employee's own family, and whether merit or need decided it. A payment made under no scheme, to one employee's child, on no stated criterion, is difficult to defend as a scholarship however it is labelled in the voucher. Clause (17A) is the reverse: the label matters less and the paperwork matters more. The clause asks two questions the recipient usually cannot answer from his own records. Who instituted the award? If it was the Central Government or a State Government, that is the end of it. If it was any other body — a foundation, a trade association, a private trust — the award itself must have been approved by the Central Government in that behalf, and without that approval the payment is not within sub-clause (i) however public-spirited the award is. And for a reward given by the Central or a State Government under sub-clause (ii), what needs approval is the purpose. A recipient who is asked to prove the exemption has to go back to the grantor for the instituting document and the approval notification, which is far easier to do in the year of receipt than three years later when the notice arrives.
Binding on the department, not on the assessee or the courts. An assessee may rely on a circular that is beneficial to them.
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Clause (16) of section 10 reads in its entirety: 'scholarships granted to meet the cost of education'. No amendment footnote is attached to it. Clause (17A) reads: 'any payment made, whether in cash or in kind,— (i) in pursuance of any award instituted in the public interest by the Central Government or any State Government or instituted by any other body and approved by the Central Government in this behalf; or (ii) as a reward by the Central Government or any State Government for such purposes as may be approved by the Central Government in this behalf in the public interest'. No amendment footnote is attached to clause (17A) either. Both are clauses of the Income-tax Act, 1961.
Clause (16) exempts a scholarship granted to meet the cost of education. The clause imposes no approval requirement, no monetary limit and no restriction on who may grant the scholarship, and it does not condition the exemption on the amount actually being spent; the two elements are that the payment is a scholarship and that it is granted to meet the cost of education. Clause (17A) exempts a payment, whether in cash or in kind, made either in pursuance of an award instituted in the public interest, or as a reward by the Central Government or a State Government. Where the award was instituted by the Central Government or a State Government, no approval is called for. Where it was instituted by any other body, approval of the Central Government in that behalf is required. In the reward limb, what must be approved by the Central Government in the public interest is the purpose for which the reward is given.
Not applicable — this is a statement of statutory text. No judicial reasoning is involved, and no decision on either clause has been traced.
any payment made, whether in cash or in kind,— (i) in pursuance of any award instituted in the public interest by the Central Government or any State Government or instituted by any other body and approved by the Central Government in this behalf; or (ii) as a reward by the Central Government or any State Government for such purposes as may be approved by the Central Government in this behalf in the public interest
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Handle my notice → Ask a CA on WhatsAppThe two clauses ask different questions and only one of them looks for an approval. Clause (16) of section 10 exempts 'scholarships granted to meet the cost of education'. There is no approval requirement in it, no ceiling, no condition about who the grantor is, and no requirement that the whole of the scholarship be spent. What it does require is that the payment be a scholarship and that it be granted to meet the cost of education. Clause (17A) exempts 'any payment made, whether in cash or in kind,— (i) in pursuance of any award instituted in the public interest by the Central Government or any State Government or instituted by any other body and approved by the Central Government in this behalf; or (ii) as a reward by the Central Government or any State Government for such purposes as may be approved by the Central Government in this behalf in the public interest'. Approval by the Central Government is required in two places there: for an award instituted by a body other than the Central or a State Government, and for the purposes for which a reward is given by the Central or a State Government. This was decided by the CBDT Circulars & Instructions (Not applicable — statutory text) and bears on section 10(16), section 10(17A), section 17(2), section 15 of the Income Tax Act 1961. It is reported as Section 10(16) and section 10(17A) of the Income-tax Act, 1961, as amended up to 2023. These two clauses are short enough to be misread as unconditional, and each has a condition hiding in plain sight. Clause (16) has one: the payment must be a scholarship, granted to meet the cost of education. Everything else that people expect to find there is absent. There is no approval, no ceiling, no requirement that the grantor be a government or a recognised institution, and no requirement that the money be spent down to the last rupee. An officer who taxes the unspent balance of a scholarship is adding a condition the clause does not contain. The real fight on clause (16) is at the other end, over what the payment is. Where an employer, or a trust the employer funds, pays the fees of an employee's child, the Department will say the receipt arises from the employment and is a perquisite, and the answer will turn on the terms on which it was granted — whether there was a scheme, whether it was open beyond the employee's own family, and whether merit or need decided it. A payment made under no scheme, to one employee's child, on no stated criterion, is difficult to defend as a scholarship however it is labelled in the voucher. Clause (17A) is the reverse: the label matters less and the paperwork matters more. The clause asks two questions the recipient usually cannot answer from his own records. Who instituted the award? If it was the Central Government or a State Government, that is the end of it. If it was any other body — a foundation, a trade association, a private trust — the award itself must have been approved by the Central Government in that behalf, and without that approval the payment is not within sub-clause (i) however public-spirited the award is. And for a reward given by the Central or a State Government under sub-clause (ii), what needs approval is the purpose. A recipient who is asked to prove the exemption has to go back to the grantor for the instituting document and the approval notification, which is far easier to do in the year of receipt than three years later when the notice arrives. If it applies to you, the first step is this: For a scholarship, ask two questions and no others: is the payment a scholarship, and was it granted to meet the cost of education? Clause (16) attaches no approval, no monetary ceiling and no condition about the identity of the grantor.
Clause (16) of section 10 reads in its entirety: 'scholarships granted to meet the cost of education'. No amendment footnote is attached to it. Clause (17A) reads: 'any payment made, whether in cash or in kind,— (i) in pursuance of any award instituted in the public interest by the Central Government or any State Government or instituted by any other body and approved by the Central Government in this behalf; or (ii) as a reward by the Central Government or any State Government for such purposes as may be approved by the Central Government in this behalf in the public interest'. No amendment footnote is attached to clause (17A) either. Both are clauses of the Income-tax Act, 1961. It was decided by the CBDT Circulars & Instructions (Not applicable — statutory text). On those facts the CBDT Circulars & Instructions held as follows. Clause (16) exempts a scholarship granted to meet the cost of education. The clause imposes no approval requirement, no monetary limit and no restriction on who may grant the scholarship, and it does not condition the exemption on the amount actually being spent; the two elements are that the payment is a scholarship and that it is granted to meet the cost of education. Clause (17A) exempts a payment, whether in cash or in kind, made either in pursuance of an award instituted in the public interest, or as a reward by the Central Government or a State Government. Where the award was instituted by the Central Government or a State Government, no approval is called for. Where it was instituted by any other body, approval of the Central Government in that behalf is required. In the reward limb, what must be approved by the Central Government in the public interest is the purpose for which the reward is given.
Not applicable — this is a statement of statutory text. No judicial reasoning is involved, and no decision on either clause has been traced. In the words reproduced by the source cited on this page: "any payment made, whether in cash or in kind,— (i) in pursuance of any award instituted in the public interest by the Central Government or any State Government or instituted by any other body and approved by the Central Government in this behalf; or (ii) as a reward by the Central Government or any State Government for such purposes as may be approved by the Central Government in this behalf in the public interest"
It was decided by the CBDT Circulars & Instructions and is reported as Section 10(16) and section 10(17A) of the Income-tax Act, 1961, as amended up to 2023. Binding on the department, not on the assessee or the courts. An assessee may rely on a circular that is beneficial to them. A CBDT circular or instruction binds officers of the department but not the assessee and not the courts. Where a circular helps you, you may hold the department to it. Where it hurts you, it cannot override the Act or a judgment. On section 10(16), section 10(17A), section 17(2), section 15, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It cuts both ways and is cited by both sides. Clause (16) exempts a scholarship granted to meet the cost of education. The clause imposes no approval requirement, no monetary limit and no restriction on who may grant the scholarship, and it does not condition the exemption on the amount actually being spent; the two elements are that the payment is a scholarship and that it is granted to meet the cost of education. Clause (17A) exempts a payment, whether in cash or in kind, made either in pursuance of an award instituted in the public interest, or as a reward by the Central Government or a State Government. Where the award was instituted by the Central Government or a State Government, no approval is called for. Where it was instituted by any other body, approval of the Central Government in that behalf is required. In the reward limb, what must be approved by the Central Government in the public interest is the purpose for which the reward is given. It arises in Capital Gains Exemptions and Salary & Perquisites matters, on section 10(16), section 10(17A), section 17(2), section 15 of the Income Tax Act 1961, and was decided by Not applicable — statutory text. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Do not concede tax merely because part of the scholarship was not spent on fees. The clause exempts a scholarship granted to meet the cost of education; it does not say 'to the extent spent'. Where the payer is the employer or an employer's trust, examine whether what was paid is a scholarship at all or a perquisite dressed as one. That is where the dispute lies on these facts, and it turns on the terms on which the payment was made — whether it was granted on merit or need under a scheme open beyond the employee's family, or whether it was a benefit arising from the employment. For an award, identify who instituted it. Where the Central Government or a State Government instituted the award, sub-clause (i) needs nothing more. Where any other body instituted it, sub-clause (i) requires approval by the Central Government in this behalf, and the approval is of the award. For a reward, identify who gave it and for what. Sub-clause (ii) covers a reward by the Central Government or a State Government, and the purposes for which it is given must be approved by the Central Government in this behalf in the public interest. The approval there is of the purpose, not of the recipient. Read the two sub-clauses of clause (17A) as alternatives, not as cumulative conditions; they are separated by 'or'. Keep the instituting document, the scheme and any approval notification on file. Both clauses turn on documents that exist at the grantor's end and that the recipient is rarely given without asking.
Still good law. Both clauses stand as published. Clause (16) and clause (17A) appear in the words reproduced here and neither carries an amendment footnote, so no amendment to either is recorded. Only one published text reaching these clauses has been obtained, so this entry records no comparison between editions and the corroborating list is deliberately left empty rather than filled with texts that do not carry these clauses at all. The reason these two clauses are treated together is that they are short, they sit close in the same section, and the question a reader brings to them is the same question: is this receipt exempt, and does anything have to be approved? Keeping them on one page lets the contrast be seen, which is the useful part — clause (16) asks for no approval at all and clause (17A) asks for approval in two specific places. Separating them would have produced two thin pages that each withheld the comparison. What is not stated here is the case law, and there is a body of it, particularly on clause (16) and on whether a payment by an employer or an employer's trust for the education of an employee's child is a scholarship or a perquisite. No decision on either clause has been traced and none is cited; the boundary question is flagged in the body of this entry as the place where the dispute lies, and nothing is asserted about how it has been resolved. Nothing is said about the interaction between clause (16) and the perquisite provisions, about whether a stipend paid to a trainee or a resident doctor is a scholarship, or about what 'cost of education' extends to. No commencement date was established for either clause and no date is given. No successor provision under the Income-tax Act, 2025 has been established, so none is given. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
Both clauses are taken from the Department's own published text of the Income-tax Act, 1961, which prints section 10 as a continuous run of clauses. Clause (16) appears there in five words and clause (17A) in the two sub-clauses reproduced above, and neither carries an amendment footnote. ONE RECORD OR TWO. These two clauses share a record, and the choice was deliberate. Clause (16) is a single line and clause (17A) is a short paragraph; each on its own would make a page that could be read in fifteen seconds and would leave the reader with the wrong impression, because the interesting thing about either clause only appears when it is set beside the other. Clause (16) requires no approval by anybody. Clause (17A) requires approval by the Central Government in two distinct places — of the award where a body other than a government instituted it, and of the purpose where a government gives a reward. A reader who arrives with a payment in hand needs that contrast, and splitting the clauses would have buried it. Where a reader is looking only for one of them, the section labels on this entry carry him to the right hub either way. WHAT WAS NOT DONE. No second published edition carrying these clauses has been located, so there is no cross-edition comparison behind this entry and the corroborating list is empty; that is a limitation on the evidence and not a finding that no other edition exists. The published texts of section 10 available here stop within clause (23C) and have not been read beyond it. No notification approving an award or a purpose under clause (17A) has been read, and none is named. The perquisite provisions have not been read either: sections 15 and 17(2) are named on this entry because the scholarship-or-perquisite boundary is discussed in the prose, and nothing about their content is asserted. No commencement date was established for either clause and no date is given on this entry. No judicial decision on either clause has been traced and none is cited, so the entry is a statement of what the two clauses say and of where the argument on each of them will be, and nothing more. No successor provision under the Income-tax Act, 2025 has been established, so none is given, and a reader working on a tax year governed by that Act must find the corresponding provision for himself before relying on anything here. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
Clause (16) exempts a scholarship granted to meet the cost of education. The clause imposes no approval requirement, no monetary limit and no restriction on who may grant the scholarship, and it does not condition the exemption on the amount actually being spent; the two elements are that the payment is a scholarship and that it is granted to meet the cost of education. Clause (17A) exempts a payment, whether in cash or in kind, made either in pursuance of an award instituted in the public interest, or as a reward by the Central Government or a State Government. Where the award was instituted by the Central Government or a State Government, no approval is called for. Where it was instituted by any other body, approval of the Central Government in that behalf is required. In the reward limb, what must be approved by the Central Government in the public interest is the purpose for which the reward is given.
TaxSphere, “Statutory position — s.10(16) and s.10(17A): a scholarship granted to meet the cost of education, and an award or reward in the public interest, and what each of them actually requires”, https://taxnotice.vittsphere.com/caselaw/case/statutory-position-10-16-and-10-17a-scholarships-to-meet-the-cost-of-education-and-awards-in-the-public-interest/ (validity last checked 2026-09-23)
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