Sahitya Akademi has also instituted a Fellowship named after Premchand during his 125th Birth Anniversary in 2005. This Fellowship would be given to scholars doing research on Indian literature or to creative writers from the countries of the SAARC region other than India.

The following are the details of the scheme and rules and procedure for operating it:

1. One Fellowship may be offered to a person of eminence in the field of culture and literature from the Saarc countries every year.
2. The period of Fellowship should be from one month to three months depending on the convenience and availability of the writer/scholar.
3. Actual cost of international air journey may be borne by the Sahitya Akademi, as also train or air journey within India.
4. Arrangements for boarding and lodging would be made by the Sahitya Akademi.
5. An amount of Rs.25,000 per month might be given to the scholar/writer for meeting incidental expenses.
6. A database of writers and scholars might be created to select the Fellows. Names of writers and scholars might be invited from the Indian Missions in SAARC countries, members of the Executive Board of the Sahitya Akademi, senior writers and scholars and from select cultural and literary institutions and universities.
7. The visiting Fellow might deliver talks or do readings from his/her works in different places during his visit.
8. The visiting Fellow will be expected to submit a comprehensive report of his visit which will be placed before the Executive Board.

The first Premchand Fellowship was offered to Janab Intizar Husain eminent Urdu fiction writer and columnist from Pakistan. He visited India in two phases. He participated in literary programmes and delivered lectures at Aligarh Muslim University, Luchnow University, Patna University and Banaras Hindu University in the first phase of his visit from 1 September 2007 to 3 September 2007. In the second phase, he took part in programmes held at Bangalore, Mysore, Hyderabad, Kolkata, Jodhpur, Jaipur, Udaipur and delivered lectures at Delhi University, Jawaharlal Nehru University, Marathwada University, Aurangabad, Hyderabad University from 24 January to 25.