New Indian Labour Code Rules Offer Creche Allowance of Rs 500/Month Per Child

New central government labour code rules offer a creche allowance of at least Rs 500 per month per child for two children.

This benefit applies to employees with children under six years old if their company does not provide a creche facility. The allowance is taxable. These rules are effective from May 8, 2026, and apply to specific establishments.

The new labour code rules were notified by the central government on May 8, 2026 and this means employees who are working in such a company where central government labour code rules apply can expect to get the benefits of the new labour code. One such benefit is creche allowance of at least Rs 500 per month per child for maximum two children till the child’s six years age.

Earlier, the old labour law said that companies need to construct a creche facility, now the law says either construct or pay a monthly money to the employee. Thus you need to check with your company if they have their own creche facility or are willing to pay you the creche allowance.

However, since this is the central government labour code rules, some companies still need to follow both the central and state government new labour code rules, so if you are an employee working with such a company, then you need to wait.

What is the new creche allowance framework under the new central government labour code rules?

Lokesh Gulati, Partner, PwC India said to ET Wealth Online that as per the Rule 37(Viii)(b), if women or widower or single parent employees, who are having children below the age of six years and eligible to get crèche facility and if not provided, then, such employee can be paid crèche allowance every month by that company or establishment.

How much money can an employee get as a creche allowance if the company has no creche?

Gulati says that the amount of creche allowance must not be less than Rs 500 per month per child or such amount as may be notified by the Central Government from time to time.

Gulati says that the creche allowance is for children below the age of six years and is admissible for two children only, except when the number of children exceeds two due to second childbirth resulting in multiple births.

What is the tax treatment for employees who are getting creche allowance?

Presently, there is no specific exemption given under the Income Tax Act, 2025. Gulati from PWC India says: “Therefore, Crèche Allowance contemplates as a taxable component.”

Which companies need to follow central government labour code rules?

The provisions mentioned in OSHWC Central Rules, 2026 which was notified on May 8, 2026 is only applicable to the establishment of:

Railways, mines, oil fields, major ports, air transport service, telecommunications, banking and insurance company, and

Central Public Sector Undertaking and subsidiaries, Corporation and

Autonomous bodies owned or controlled by the Central Government and establishment of contractors for the purpose of such establishments wherein Central Government is appropriate government.