Maharashtra Child Labour Rules 2025: Tax & Compliance Impact

What Happened?

The Maharashtra Government has officially notified the Maharashtra Child and Adolescent Labour (Prohibition and Regulation) (Amendment) Rules, 2025. These amended rules significantly strengthen child labour prohibition, introduce regulatory safeguards for child artists, operationalise rehabilitation funds, and enhance employer compliance obligations across the state. The notification came into effect in July 2026, marking an important shift in how child labour and child artist engagement is regulated in Maharashtra.

Background & Legal Context

Child labour regulations in India fall under the Child and Adolescent Labour (Prohibition and Regulation) Act, 1986, which prohibits employment of children in hazardous occupations and processes. Maharashtra, being one of India's largest industrial and entertainment hubs, has significant child artist engagement in films, television, theatre, and digital content.

The 2025 Amendment Rules now align with broader labour law reforms and introduce several new compliance mechanisms:

• Child Artist Regulation Framework: Specific guidelines for child performers in entertainment, including age verification, working hour restrictions, and safety protocols
• Rehabilitation Fund Operationalisation: Structured fund management for rehabilitation of exploited children, with contributions from non-compliant employers
• Task Forces: State and district-level task forces to monitor and enforce compliance
• Employer Accountability: Enhanced penalties and compliance obligations for entities engaging child labour

From an Income Tax Act 2025 perspective, these rules create several compliance obligations that have tax and deductibility implications for employers and business entities.

What Does This Mean for You?

1. For Entertainment Industry & Child Artist Employers

If your business engages child artists (in films, TV, digital content, theatre), you must now:

• Maintain proper age verification documents and obtain parental consent with notarised signatures
• Maintain records showing compliance with working hour restrictions (typically 4-6 hours per day depending on age group)
• Ensure child safety provisions including supervision, medical facilities, and education continuation
• File periodic compliance certificates with district authorities

Under Section 37(1) of Income Tax Act 2025, business expenditure (including payments to child artists) is deductible only if it is wholly and exclusively for business purposes and complies with applicable laws. Non-compliance with these new Rules may result in:

• Disallowance of expenditure under Section 37 during tax assessment
• Penalties under Income Tax Act for employing children in violation of these Rules
• Criminal prosecution under labour laws (separate from tax law)

2. Rehabilitation Fund Contributions

Employers found violating child labour norms are now required to contribute to the Rehabilitation Fund. These contributions are:

• Tax Treatment: May be claimed as deductible expenditure under Section 37 if imposed as penalty or under Section 80G if structured as charitable contribution (requires specific charitable registration)
• Assessment Years: Contributions made in AY 2025-26 and onwards must be documented and claimed with supporting Government orders
• Timing: Deduction depends on actual payment or accrual, as per your accounting method

Important: If the contribution is a compulsory penalty imposed by authorities, it may NOT be deductible under Section 37, as penalties are generally not business expenses. Consult your tax advisor on the specific nature of the contribution imposed.

3. For Parents/Guardians Receiving Child Artist Income

Parents or guardians receiving income on behalf of child artists must:

• File Income Tax Returns reporting this income in their own name (children below 18 years cannot file separate returns)
• Claim benefit of Section 10(32) of Income Tax Act 2025 (income of minor child is clubbed with parent's income)
• Maintain records of all performance contracts, payments received, and compliance with Rules
• Set aside portion of earnings in separate bank account (many State Governments now mandate this)

4. For Non-Entertainment Businesses

If your business involves any form of child engagement (even apprenticeship or training), you must ensure:

• Compliance with age restrictions and hazardous occupation prohibitions
• Documentation of parental/guardian consent and legal authorization
• Compliance with working hour restrictions under Rule 5 of the amended Rules
• Proper record-keeping for labour inspection and tax scrutiny

What Should You Do Now?

Immediate Action Items (By September 2026)

1. Audit Your Compliance Status:

• If you engage child artists or child workers, conduct internal audit against the 2025 Amendment Rules
• Verify age documentation, parental consents, working hours, and safety provisions
• Document any gaps in compliance

2. Update Contracts & Documentation:

• Revise all child artist/worker engagement contracts to include new compliance clauses
• Ensure parental consent forms comply with Government templates
• Create age verification SOP and maintain digital records

3. Tax Compliance Preparation:

• Segregate all child artist/worker expenses in separate cost centre for audit trail
• Maintain detailed records of payments, contract terms, and Rule compliance
• Prepare documentation proving compliance for tax assessment defence
• If penalties or rehabilitation fund contributions are imposed, maintain supporting Government orders

4. Professional Consultation:

• Engage CA to review tax implications of child artist payments in your business
• Obtain labour law compliance certification from qualified consultant
• File amended returns (if necessary) for previous years' non-compliance

For AY 2025-26 & AY 2026-27 Tax Filing

• Disclose all child artist/worker engagement details in Schedule TA (additional information) if applicable
• Maintain linked documentation (contracts, consent forms, payment records) for 7 years
• If assessed on these expenses, be prepared with compliance records to defend deductibility under Section 37

Key Takeaways

• New Compliance Mandatory: Maharashtra's 2025 Amendment Rules introduce stricter child labour safeguards with enforcement by State task forces—non-compliance attracts penalties and potential disallowance of expenses under Income Tax Act 2025
• Tax Deductibility Risk: Business expenditure on child artists/workers is deductible under Section 37 only if it complies with these Rules; non-compliance may trigger disallowance during assessment for AY 2025-26 onwards
• Documentation Critical: Age verification, parental consents, working hour records, and safety compliance must be maintained meticulously as evidence against tax scrutiny and labour inspection
• Rehabilitation Fund Contributions: Penalties or contributions imposed by authorities may not be tax-deductible; treatment depends on nature and notification—seek professional guidance
• Parent's Tax Obligation: Income earned by child artists is clubbed with parents' income under Section 10(32); parents must report this in their ITR and maintain full documentation for AY 2025-26 onwards

Compliance with these Rules is not optional—it is mandatory labour law requirement with direct tax consequences. Businesses ignoring these reforms risk both labour penalties and tax disallowance during assessment.

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