Section 10(25) of the Income Tax Act provides tax exemptions for income earned by various retirement-related funds, ensuring that contributions and earnings meant for employee welfare aren’t eroded by taxation.
What’s Exempt:
- Interest and capital gains from securities held by:
- Provident funds governed by the Provident Funds Act, 1925.
- Income received by trustees on behalf of:
- A Recognised Provident Fund,
- An Approved Superannuation Fund,
- An Approved Gratuity Fund.
- Income received by Boards of Trustees under:
- The Coal Mines Provident Fund Act, 1948 (for the Deposit-linked Insurance Fund),
- The Employees’ Provident Funds Act, 1952 (for the Deposit-linked Insurance Fund).
Example:
Suppose the Employees’ Provident Fund Organisation (EPFO) earns ₹100 crore in interest and capital gains from its investment portfolio. Since EPFO is governed under the 1952 Act and manages a notified Deposit-linked Insurance Fund, this income is fully exempt under Section 10(25).
This provision ensures that retirement savings and insurance benefits for workers grow tax-free until they’re distributed.
