Income tax exemption under Section 10(46)
The CBDT has granted income tax exemption under Section 10(46) to two state-run welfare boards—Andhra Pradesh Building and Other Construction Workers Welfare Board and Puducherry Building and Other Construction Workers Welfare Board. This move aligns with the government’s approach to support statutory bodies working for the welfare of unorganised sector labourers.
What is Section 10(46) of the Income-tax Act?
Section 10(46) provides income tax exemption to certain specified bodies or authorities that are:
- Notified by the Central Government
- Established under central or state laws
- Engaged in public functions like development, welfare, or regulation
Only income specified in the notification is exempt. Other income (like interest from FDs beyond specified scope) may still be taxable.
What income is exempt for these Welfare Boards?
According to the recent CBDT Notifications No. 49/2025 and 50/2025 dated 16 July 2025, the following types of income are exempt from income tax:
- Cess or contribution received from building and construction establishments
- Registration fees from workers and employers
- Grants or contributions from state governments
- Interest earned on such receipts
- Any income arising from investment or asset management of these funds
Legal reference: CBDT Notification No. 49/2025 & 50/2025 issued under clause (46) of Section 10 of the Income-tax Act, 1961.
Why is this exemption important?
These Welfare Boards function under the Building and Other Construction Workers (Regulation of Employment and Conditions of Service) Act, 1996. They:
- Provide financial assistance to registered workers
- Offer benefits like pension, maternity aid, accident cover, and education support
- Fund healthcare and housing welfare schemes
Income tax exemption ensures maximum utilisation of funds for workers instead of spending on tax outflows.
Expert View:
According to tax practitioners, exemption under Section 10(46) is crucial for such welfare funds, as:
“It avoids double taxation—once when the state collects cess, and again when it’s redeployed for workers’ welfare. This aligns with the principle of equity in tax law.” — CA V. Srinivas, Visakhapatnam
Conditions for the Exemption
The exemption is valid only if:
- The Board files returns under Section 139(4C)
- Exempt income is used only for notified purposes
- No part of income is used for commercial gain or distributed to any member
Violation may lead to withdrawal of exemption under Section 10(46).
How is this different from Section 12AA/12AB exemption?
| Criteria | Section 10(46) | Section 12AA/12AB |
|---|---|---|
| Applicable to | Government statutory bodies | Charitable trusts and NGOs |
| Needs CBDT notification | Yes | No (only registration required) |
| Benefit | Income tax exemption on specific items | Exemption on all income if used properly |
| Conditions | Strictly use funds for notified purpose | Apply 85% funds for charitable purposes |
Efiletax Tip:
If your organisation is a government-notified welfare body, consider applying under Section 10(46) instead of 12AB for a more tailored tax exemption, especially if your income sources are public grants, cess, or levies.
Final Thoughts
CBDT’s latest notifications reinforce the intent of Indian tax laws—to protect funds meant for the social security of unorganised workers. It also promotes transparency by ensuring only authorised statutory bodies enjoy this exemption.
If you’re managing a similar welfare fund or body, or need clarity on whether your entity qualifies under Section 10(46), get in touch with our tax experts at Efiletax for guidance and application support.
FAQs
Q1. Is this exemption permanent?
No. CBDT grants this exemption for a specific period (usually 3–5 years) and may renew it based on compliance.
Q2. Can a private trust get exemption under Section 10(46)?
No. Only statutory bodies notified by the Central Government are eligible under this section.
Q3. Does this mean all income of the Board is tax-free?
Only income specified in the notification is tax-exempt. Any unrelated or commercial income remains taxable.
Summary
CBDT grants income tax exemption under Section 10(46) to Andhra Pradesh and Puducherry Construction Workers Welfare Boards, covering cess, registration fees, and interest income. These funds support unorganised sector workers through welfare schemes.