Centre Notifies 1% Construction Welfare Cess

The Government of India notified a 1% cess on the total cost of construction incurred by employers for building and other construction works under the Code on Social Security, 2020. The notification was issued under Section 100(1) of the Code on Social Security, 2020, and it replaced a notification dated 26 September 1996.

Construction Welfare Cess

The cess is levied on the total construction cost paid by employers for building and other construction works. The rate notified is 1% of the construction cost, and the levy applies to commercial buildings regardless of construction cost.

Coverage and Exemptions

Under the new labour codes, individuals building houses costing less than ₹50 lakh are exempt from paying the building cess from 21 November 2025. Earlier, the threshold was ₹10 lakh or properties above 100 square metres.

Welfare Use and Administration

Collections from the cess are used for welfare measures for construction workers, including health benefits, financial aid, insurance, and educational support for workers’ children. The funds are managed through Building and Other Construction Workers Welfare Boards, which function under the welfare framework for workers in the unorganised sector.

Important Facts for Exams

• The Code on Social Security, 2020, is one of the four labour codes of India.
• Section 100(1) of the Code on Social Security, 2020, provides the legal basis for the construction welfare cess.
• Building and Other Construction Workers Welfare Boards administer welfare funds for construction workers in many States and Union Territories.
• The Central Board of Direct Taxes granted Section 10(46) income-tax exemption to the West Bengal Building and Other Construction Workers Welfare Board on 14 January 2026.

Draft Rules and Social Security Linkage

Rule 42 of the Draft Code on Social Security (Central) Rules, 2025, provides for a self-assessment mechanism for cess payment, with certification by a chartered engineer. The Centre has also stated a plan to integrate the labour cess into the formal social security system for pensions and Employees’ State Insurance Corporation healthcare benefits.