Section 10(24): The Tax Exemption Rule for Trade Union Income

Trade unions have always played a significant role in shaping labor rights and protecting the interests of workers. To ensure that these organizations can carry on their activities without unnecessary financial burden, the Indian tax system has given them certain exemptions. Section 10 of the Income Tax Act, 1961, is the provision that deals with various incomes that do not form part of total taxable income. Within this, Section 10(24) specifically focuses on trade union income.

This rule recognizes the importance of trade unions in supporting workers & ensures that their income, when used for legitimate purposes, is not subject to tax. In addition, the Income Tax Act provides relief in other scenarios, such as by providing an exemption of income earned by minor children in specified cases. Together, these exemptions help in reducing the tax burden on entities and families alike.

What is Section 10(24) of the Income Tax Act?

Section 10(24) of the Income Tax Act is a special provision that grants exemptions to trade unions. According to this section, any income earned by a registered trade union is exempt from tax, provided it is used exclusively for carrying on the activities of the union.

This means that if a trade union generates income from sources like subscriptions, donations, or even investments, it does not have to pay tax on that income. However, there is one important condition:

• The exemption under Section 10(24) is available only if the income of the trade union is used for the purpose of carrying on the activities of the trade union.

If the income is diverted for purposes other than union-related activities, the exemption will not apply.

Registered trade unions enjoy full exemption on their income under Section 10(24) — but only if conditions are met. 👉 click here

Key Features of Section 10(24)

1. Exclusive to Registered Trade Unions
   • The exemption applies only to trade unions registered under the Trade Unions Act, 1926, or other laws.
2. Purpose-Based Usage
   • The most critical requirement is that the income should be used solely for trade union purposes like welfare of workers, legal support, administrative expenses, or member services."
3. Types of Income Covered
   • Membership fees, subscriptions, voluntary donations, and interest on investments can qualify for exemption.
4. Non-Applicability
   • If income is used for commercial activities or diverted for unrelated purposes, the exemption will be denied.

Also Read: Tax-Free Benefits from Provident Funds and Sukanya Samriddhi Account

Why Did the Law Provide This Exemption?

Trade unions are not profit-making entities. Their purpose is to protect & advance the rights of workers. Taxing their income would reduce their ability to function effectively. By granting this exemption, the government ensures:

• Trade unions remain financially strong.
• Workers’ welfare activities continue without tax hurdles.
• Administrative & legal costs do not overburden the union.

Section 10(24) vs. Other Exemptions Under Section 10

While Section 10(24) is specifically focused on trade unions, it sits alongside other important exemptions under Section 10. One such exemption is the provision that provides for an exemption of income earned by minor children. This shows how the law balances relief across organizations and individuals.

• For trade unions: The exemption ensures collective welfare.
• For families: The exemption ensures small incomes of minor children are not unfairly taxed.

Both are examples of how the Income Tax Act supports social & economic fairness.

Practical Examples

Example 1: Trade Union Subscription

A trade union collects ₹10 lakhs from membership subscriptions in a financial year. If this amount is spent on legal aid for workers & administrative expenses, it is fully exempt under Section 10(24).

Example 2: Diversion of Funds

If the same trade union uses a part of its funds for commercial real estate investment that is not linked to its activities, the exemption may not apply to that portion of income.

Example 3: Income of Minor Child

Mr. Sharma’s 12-year-old son earns ₹1,000 as interest on a bank deposit. The Income Tax Act provides for an exemption of income earned by minor children up to a specified limit. Thus, the child’s income enjoys relief.

Even genuine trade union funds can become taxable if registration and filings aren’t done correctly. Curious if your union is safe?👉 click here

Benefits of Section 10(24)

• Encourages Worker Welfare: Trade unions can focus on legal & welfare activities without worrying about tax liabilities.
• Promotes Compliance: Registered unions that stay true to their objectives are rewarded with exemptions."
• Strengthens Collectives: Workers gain stronger support since unions can use their full resources.
• Comprehensive Relief: Along with trade unions, families also benefit through related provisions such as exemptions for minor children.

Challenges in Claiming Exemption

1. Strict Usage Requirement
   • If funds are misused or diverted, the exemption under Section 10(24) will be denied.
2. Documentation
   • Trade unions must maintain proper accounts & prove that income has been used exclusively for union activities.
3. Overlap with Other Sections
   • Some unions may have income that also qualifies under different provisions. Ensuring correct filing is important.

Also Read: The Tax-Free Edge of Provident Fund Withdrawals

Section 10(24) and Tax Planning

Trade unions that understand Section 10(24) can plan better:

• Invest in welfare activities: Use funds directly for worker programs.
• Maintain transparency: Keep accounts clean to avoid disputes with tax authorities.
• Avoid misuse: Stay away from unrelated investments or expenses.

For individuals, remembering that the law provides for an exemption of income earned by minor children can also help in optimizing family tax planning.

Conclusion

Section 10(24) of the Income Tax Act is a vital exemption designed to strengthen trade unions in India. The rule is clear: the exemption under Section 10(24) is available only if the income of the trade union is used for the purpose of carrying on the activities of the trade union. This ensures that unions remain true to their mission of worker welfare.

At the same time, the Income Tax Act balances fairness by offering relief in other areas, such as providing for an exemption of income earned by minor children.

If you want to ensure that you or your organization is claiming all available exemptions correctly, professional advice can help. 👉 Explore expert tax filing & advisory services at Callmyca.com – your trusted partner in simplifying tax compliance.