Section 10(25A) of the Income Tax Act provides a complete tax exemption for any income of the Employees’ State Insurance Fund (ESI Fund).
Key Features:
- Eligible Entity: The Employees’ State Insurance Fund, established under the Employees’ State Insurance Act, 1948.
- Nature of Exemption: All income of the ESI Fund is exempt from income tax—this includes contributions, interest, grants, and other receipts.
- Purpose: The exemption ensures that funds collected for employee welfare—such as medical care, sickness benefits, and maternity support—are preserved entirely for their intended social security objectives.
Example:
Suppose the ESI Fund receives:
- ₹500 crore in contributions from employers and employees,
- ₹50 crore in interest from investments,
- ₹10 crore in grants from the government.
The entire ₹560 crore is exempt from income tax under Section 10(25A), allowing the fund to fully deploy its resources for employee welfare without tax erosion