Chapter I.— Finance General
Article
264 Interpretation
In this Part, "Finance Commission"
means a Finance Commission constituted under article 280.
Article
265 Taxes not to be imposed save by authority of law
No tax
shall be levied or collected except by authority of law.
Article
266 Consolidated Funds and public accounts of India and of the
States
(1) Subject to the provisions of article 267
and to the provisions of this Chapter with respect to the assignment
of the whole or part of the net proceeds of certain taxes and duties
to States, all revenues received by the Government of India, all
loans raised by that Government by the issue of treasury bills, loans
or ways and means advances and all moneys received by that Government
in repayment of loans shall form one consolidated fund to be entitled
"the Consolidated Fund of India", and all revenues received
by the Government of a State, all loans raised by that Government by
the issue of treasury bills, loans or ways and means advances and all
moneys received by that Government in repayment of loans shall form
one consolidated fund to be entitled "the Consolidated Fund of
the State".
(2) All other public moneys received by or on
behalf of the Government of India or the Government of a State shall
be credited to the public account of India or the public account of
the State, as the case may be.
(3) No moneys out of the
Consolidated Fund of India or the Consolidated Fund of a State shall
be appropriated except in accordance with a law and for the purposes
and in the manner provided in this Constitution.
Article
267 Contingency Fund
(1) Parliament may by law
establish a Contingency Fund in the nature of an imprest to be
entitled "the Contingency Fund of India" into which shall
be paid from time to time such sums as may be determined by such law,
and the said Fund shall be placed at the disposal of the President to
enable advances to be made by him out of such Fund for the purposes
of meeting unforeseen expenditure pending authorisation of such
expenditure by Parliament by law under article 115 or article
116.
(2) The Legislature of a State may by law establish a
Contingency Fund in the nature of an imprest to be entitled "the
Contingency Fund of the State" into which shall be paid from
time to time such sums as may be determined by such law, and the said
Fund shall be placed at the disposal of the Governor of the State to
enable advances to be made by him out of such Fund for the purposes
of meeting unforeseen expenditure pending authorisation of such
expenditure by the Legislature of the State by law under article 205
or article 206.
Article
268 Duties levied by the Union but collected and appropriated by the
States
(1) Such stamp duties and such duties of excise
on medicinal and toilet preparations as are mentioned in the Union
List shall be levied by the Government of India but shall be
collected -
(a) in the case where such duties are leviable
within any Union territory, by the Government of India, and
(b)
in other cases, by the States within which such duties are
respectively leviable.
(2) The proceeds in any financial year of
any such duty leviable within any State shall not form part of the
Consolidated Fund of India, but shall be assigned to that State.
Article
269 Taxes levied and collected by the Union but assigned to the
States
(1) The following duties and taxes shall be
levied and collected by the Government of India but shall be assigned
to the States in the manner provided in clause (2), namely: -
(a)
duties in respect of succession to property other than agricultural
land;
(b) estate duty in respect of property other than
agricultural land;
(c) terminal taxes on goods or passengers
carried by railway, sea or air;
(d) taxes on railway fares and
freights;
(e) taxes other than stamp duties on transactions in
stock-exchanges and futures markets;
(f) taxes on the sale or
purchase of newspapers and on advertisements published therein;
(g)
taxes on the sale or purchase of goods other than newspapers, where
such sale or purchase takes place in the course of inter-State trade
or commerce;
(h) taxes on the consignment of goods (whether the
consignment is to the person making it or to any other person), where
such consignment takes place in the course of inter-State trade or
commerce.
(2) The net proceeds in any financial year of any such
duty or tax, except in so far as those proceeds represent proceeds
attributable to Union territories, shall not form part of the
Consolidated Fund of India, but shall be assigned to the States
within which that duty or tax is leviable in that year, and shall be
distributed among those States in accordance with such principles of
distribution as may be formulated by Parliament by law.
(3)
Parliament may by law formulate principles for determining when a
sale or purchase of, or consignment of, goods takes place in the
course of inter-State trade or commerce.
Article
270 Taxes levied and collected by the Union and distributed between
the Union and the States
(1) Taxes on income other
than agricultural income shall be levied and collected by the
Government of India and distributed between the Union and the States
in the manner provided in clause (2).
(2) Such percentage, as
may be prescribed, of the net proceeds in any financial year of any
such tax, except in so far as those proceeds represent proceeds
attributable to Union territories or to taxes payable in respect of
Union emoluments, shall not form part of the Consolidated Fund of
India, but shall be assigned to the States within which that tax is
leviable in that year, and shall be distributed among those States in
such manner and from such time as may be prescribed.
(3) For the
purposes of clause (2), in each financial year such percentage as may
be prescribed of so much of the net proceeds of taxes on income as
does not represent the net proceeds of taxes payable in respect of
Union emoluments shall be deemed to represent proceeds attributable
to Union territories.
(4) In this article -
(a) "taxes
on income" does not include a corporation tax:
(b)
"prescribed" means -
(i) until a Finance Commission
has been constituted, prescribed by the President by order, and
(ii)
after a Finance Commission has been constituted, prescribed by the
President by order after considering the recommendations of the
Finance Commission;
(c) "Union emoluments" includes
all emoluments and pensions payable out of the Consolidated Fund of
India in respect of which income-tax is chargeable.
Article
271 Surcharge on certain duties and taxes for purposes of the
Union
Notwithstanding anything in articles 269 and 270,
Parliament may at any time increase any of the duties or taxes
referred to in those articles by a surcharge for purposes of the
Union and
the whole proceeds of any such surcharge shall form
part of the Consolidated Fund of India.
Article
272 Taxes which are levied and collected by the Union and may be
distributed between the Union and the States
Union duties of
excise other than such duties of excise on medicinal and toilet
preparations as are mentioned in the Union List shall be levied and
collected by the Government of India, but, if Parliament by law so
provides, there shall be paid out of the Consolidated Fund of India
to the States to which the law imposing the duty extends sums
equivalent to the whole or any part of the net proceeds of that duty,
and those sums shall be distributed among those States in accordance
with such principles of distribution as may be formulated by such
law.
Article
273 Grants in lieu of export duty on jute and jute products
(1)
There shall be charged on the Consolidated Fund of India in each year
as grants-in-aid of the revenues of the States of Assam, Bihar,
Orissa and West Bengal, in lieu of assignment of any share of the net
proceeds in each year of export duty on jute and jute products to
those States, such sums as may be prescribed.
(2) The sums so
prescribed shall continue to be charged on the Consolidated Fund of
India so long as any export duty on jute or jute products continues
to be levied by the Government of India or until the expiration of
ten years from the commencement of this Constitution, whichever is
earlier.
(3) In this article, the expression "prescribed"
has the same meaning as in article 270.
Article
274 Prior recommendation of President require to Bills affecting
taxation in which States are interested
(1) No Bill or
amendment which imposes or varies any tax or duty in which States are
interested, or which varies the meaning of the expression
"agricultural income" as defined for the purposes of the
enactments relating to Indian income-tax, or which affects the
principles on which under any of the foregoing provisions of this
Chapter moneys are or may be distributable to States, or which
imposes any such surcharge for the purposes of the Union as is
mentioned in the foregoing provisions of this Chapter, shall be
introduced or moved in either House of Parliament except on the
recommendation of the President.
(2) In this article, the
expression "tax or duty in which States are interested"
means -
(a) a tax or duty the whole or part of the net proceeds
whereof are assigned to any State; or
(b) a tax or duty by
reference to the net proceeds whereof sums are for the time being
payable out of the Consolidated Fund of India to any State.
Article
275 Grants from the Union to certain States
(1) Such
sums as Parliament may by law provide shall be charged on the
Consolidated Fund of India in each year as grants-in-aid of the
revenues of such States as Parliament may determined to be in need of
assistance, and different sums may be fixed for different
States:
Provided that there shall be paid out of the
Consolidated Fund of India as grants-in-aid of the revenues of a
State such capital and recurring sums as may be necessary to enable
that State to meet the costs of such schemes of development as may be
undertaken by the State with the approval of the Government of India
for the purpose of promoting the welfare of the Scheduled Tribes in
that State or raising the level of administration of the Scheduled
Areas therein to that of the administration of the rest of the areas
of that State:
Provided further that there shall be paid out of
the Consolidated Fund of India as grants-in-aid of the revenues of
the State of Assam sums, capital and recurring, equivalent to -
(a)
the average excess of expenditure over the revenues during
the
two years immediately preceding the commencement of this Constitution
in respect of the administration of the tribal areas specified in
Part I of the table appended to paragraph 20 of the Sixth Schedule;
and
(b) the costs of such schemes of development as may be
undertaken by that State with the approval of the Government of India
for the purpose of raising the level of administration of the said
areas to that of the administration of the rest of the areas of that
State.
(1A) On and from the formation of the autonomous State
under article 244A, -
(i) any sums payable under clause (a) of
the second proviso to clause (1) shall, if the autonomous State
comprises all the tribal areas referred to therein, be paid to the
autonomous State, and, if the autonomous State comprises only some of
those tribal areas, be apportioned between the State of Assam and the
autonomous State as the President may, by order, specify;
(ii)
there shall be paid out of the Consolidated Fund of India as
grants-in-aid of the revenues of the autonomous State sums, capital
and recurring, equivalent to the costs of such schemes of development
as may be undertaken by the autonomous State with the approval of the
Government of India for the purpose of raising the level of
Administration of that State to that of the administration of the
rest of the State of Assam.
(2) Until provision is made by
Parliament under clause (1), the powers conferred on Parliament under
that clause shall be exercisable by the President by order and any
order made by the President under this clause shall have effect
subject to any provision so made by Parliament:
Provided that
after a Finance Commission has been constituted no order shall be
made under this clause by the President except after considering the
recommendations of the Finance Commission.
Article
276 Taxes on professions, trades, callings and employments
(1)
Notwithstanding anything in article 246, no law of the Legislature of
a State relating to taxes for the benefit of the State or of a
municipality, district board, local board or other local authority
therein in respect of professions, trades, callings or employments
shall be invalid on the ground that it relates to a tax on
income.
(2) The total amount payable in respect of any one
person to the State or to any one municipality, district board, local
board or other local authority in the State by way of taxes on
professions, trades, callings and employments shall not exceed two
thousand and five hundred rupees per annum.
(3) The power of the
Legislature of a State to make laws as aforesaid with respect to
taxes on professions, trades, callings and employments shall not be
construed as limiting in any way the power of Parliament to make laws
with respect to taxes on income accruing from or arising out of
professions, trades, callings and employments.
Article
277 Savings
Any taxes, duties, cesses or fees which,
immediately before the commencement of this Constitution, were being
lawfully levied by the Government of any State or by any municipality
or other local authority or body for the purposes of the State,
municipality, district or other local area may, notwithstanding that
those taxes, duties, cesses or fees are mentioned in the Union List,
continue to be levied and to be applied to the same purposes until
provision to the contrary is made by Parliament by law.
Article
278 Agreement with States in Part B of the First Schedule with regard
to certain financial matters
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Article
279 Calculation of "net proceeds", etc.
(1)
In the foregoing provisions of this Chapter, "net proceeds"
means in relation to any tax or duty the proceeds thereof reduced by
the cost of collection, and for the purposes of those provisions the
net proceeds of any tax or duty, or of any part of any tax or duty,
in or attributable to any area shall be ascertained and certified by
the Comptroller and Auditor-General of India, whose certificate shall
be final.
(2) Subject as aforesaid, and to any other express
provision of this Chapter, a law made by Parliament or an order of
the President may, in any case where under this Part the proceeds of
any duty or tax are, or may be, assigned to any State, provide for
the manner in which the proceeds are to be calculated, for the time
from or at which and the manner in which any payments are to be made,
for the making of adjustments between one financial year and another,
and for any other incidental or ancillary matters.
Article
280 Finance Commission
(1) The President shall, within
two years from the commencement of this Constitution and thereafter
at the expiration of every fifth year or at such earlier time as the
President considers necessary, by order constitute a Finance
Commission which shall consist of a Chairman and four other members
to be appointed by the President.
(2) Parliament may by law
determine the qualifications which shall be requisite for appointment
as members of the Commission and the manner in which they shall be
selected.
(3) It shall be the duty of the Commission to make
recommendations to the President as to - (a) the distribution between
the Union and the States of the net proceeds of taxes which are to
be, or may be, divided between them under this Chapter and the
allocation between the States of the respective shares of such
proceeds;
(b) the principles which should govern the
grants-in-aid of the revenues of the States out of the Consolidated
Fund of India;
(bb) the measures needed to augment the
Consolidated Fund of a State to supplement the resources of the
Panchayats in the State on the basis of the recommendations made by
the Finance Commission of the State;
(c) the measures needed to
augment the Consolidated Fund of a State to supplement the resources
of the Municipalities in the State on the basis of the
recommendations made by the Finance Commission of the State;
(d)
any other matter referred to the Commission by the President in the
interests of sound finance.
(4) The Commission shall determine
their procedure and shall have such powers in the performance of
their functions as Parliament may by law confer on them.
Article
281 Recommendations of the Finance Commission
The President
shall cause every recommendation made by the Finance Commission under
the provisions of this Constitution together with an explanatory
memorandum as to the action taken thereon to be laid before each
House of Parliament.
Article
282 Expenditure defrayable by the Union or a State out of its
revenues
The Union or a State may make any grants for any
public purpose, notwithstanding that the purpose is not one with
respect to which Parliament or the Legislature of the State, as the
case may be, may make laws.
Article
283 Custody, etc., of Consolidated Funds, Contingency Funds and
moneys credited to the public accounts
(1) The custody
of the Consolidated Fund of India and the Contingency Fund of India,
the payment of moneys into such Funds, the withdrawal of moneys
therefrom, the custody of public moneys other than those credited to
such Funds received
by or on behalf of the Government of India,
their payment into the public account of India and the withdrawal of
moneys from such account and all other matters connected with or
ancillary to matters aforesaid shall be regulated by law made by
Parliament, and, until provision in that behalf is so made, shall be
regulated by rules made by the President.
(2) The custody of the
Consolidated Fund of a State and the Contingency Fund of a State, the
payment of moneys into such Funds, the withdrawal of moneys
therefrom, the custody of public moneys other than those credited to
such Funds received by or on behalf of the Government of the State,
their payment into the public account of the State and the withdrawal
of moneys from such account and all other matters connected with or
ancillary to matters aforesaid shall be regulated by law made by the
Legislature of the State, and, until provision in that behalf is so
made, shall be regulated by rules made by the Governor of the State.
Article
284 Custody of suitors' deposits and other moneys received by public
servants and courts
All moneys received by or deposited with
-
(a) any officer employed in connection with the affairs of the
Union or of a State in his capacity as such, other than revenues or
public moneys raised or received by the Government of India or the
Government of the State, as the case may be, or
(b) any court
within the territory of India to the credit of any cause, matter,
account or persons, shall be paid into the public account of India or
the public account of State, as the case may be.
Article
285 Exemption of property of the Union from State taxation
(1)
The property of the Union shall, save in so far as Parliament may by
law otherwise provide, be exempt from all taxes imposed by a State or
by any authority within a State.
(2) Nothing in clause (1)
shall, until Parliament by law otherwise provides, prevent any
authority within a State from levying any tax on any property of the
Union to which such property was immediately before the commencement
of this Constitution liable or treated as liable, so long as that tax
continues to be levied in that State.
Article
286 Restriction as to imposition of tax on the sale or purchase of
goods
(1) No Law of a State shall impose, or authorise
the imposition of, a tax on the sale or purchase of goods where such
sale or purchase takes place -
(a) outside the State; or
(b)
in the course of the import of the goods into, or export of the goods
out of, the territory of India.
(2) Parliament may by law
formulate principles for determining when a sale or purchase of goods
takes place in any of the ways mentioned in clause (1).
(3) Any
law of a State shall, in so far as it imposes, or authorises the
imposition of, -
(a) a tax on the sale or purchase of goods
declared by Parliament by law to be of special importance in
inter-State trade or commerce; or
(b) a tax on the sale or
purchase of goods, being a tax of the nature referred to in
sub-clause (b), sub-clause (c) or sub-clause (d) of clause (29A) of
article 366,
be subject to such restrictions and conditions in
regard to the system of levy, rates and other incidents of the tax as
Parliament may by law specify.
Article
287 Exemption from taxes on electricity
Save in so far as
Parliament may by law otherwise provide, no law of a State shall
impose, or authorise the imposition of, a tax on the consumption or
sale of electricity (whether produced by a Government or other
persons) which is -
(a) consumed by the Government of India, or
sold to the Government of India for consumption by that Government;
or
(b) consumed in the construction, maintenance or operation of
any railway by the Government of India or a railway company operating
that railway, or sold to that Government or any such railway company
for consumption in the construction, maintenance or operation of any
railway,
and any such law imposing, or authorising the
imposition of, a tax on the sale of electricity shall secure that the
price of electricity sold to the Government of India for consumption
by that Government, or to any such railway company as aforesaid for
consumption in the construction, maintenance or operation of any
railway, shall be less by the amount of the tax than the price
charged to other consumers of a substantial quantity of electricity.
Article
288 Exemption from taxation by States in respect of water or
electricity in certain cases
(1) Save in so far as the
President may by order otherwise provide, no law of a State in force
immediately before the commencement of this Constitution shall
impose, or authorise the imposition of, a tax in respect of any water
or electricity stored, generated, consumed, distributed or sold by
any authority established by any existing law or any law made by
Parliament for regulating or developing any inter-State river or
river-valley.
Explanation: The expression "law of a State
in force" in this clause shall include a law of a State passed
or made before the commencement of this Constitution and not
previously repealed, notwithstanding that it or parts of it may not
be then in operation either at all or in particular areas.
(2)
The Legislature of a State may by law impose, or authorise the
imposition of, any such tax as is mentioned in clause (1), but no
such law shall have any effect unless it has, after having been
reserved for the consideration of the President, received his assent;
and if any such law provides for the fixation of the rates and other
incidents of such tax by means of rules or orders to be made under
the law by any authority, the law shall provide for the previous
consent of the President being obtained to the making of any such
rule or order.
Article
289 Exemption of property and income of a State from Union
taxation
(1) The property and income of a State shall
be exempt from Union taxation.
(2) Nothing in clause (1) shall
prevent the Union from imposing, or authorising the imposition of,
any tax to such extent, if any, as Parliament may by law provide in
respect of a trade or business of any kind carried on by, or on
behalf of, the Government of a State, or any operations connected
therewith, or any property used or occupied for the purposes of such
trade or business, or any income accruing or arising in connection
therewith.
(3) Nothing in clause (2) shall apply to any trade or
business, or to any class of trade or business, which Parliament may
by law declare to be incidental to the ordinary functions of
Government.
Article
290 Adjustment in respect of certain expenses and pensions
Where
under the provisions of this Constitution the expenses of any Court
or Commission, or the pension payable to or in respect of a person
who has served before the commencement of this Constitution under the
Crown in India or after such commencement in connection with the
affairs of the Union or of a State, are charged on the Consolidated
Fund of India or the Consolidated Fund of a State, then, if - (a) in
the case of a charge on the Consolidated Fund of India, the court or
Commission serves any of the separate needs of a State, or the person
has served wholly or in part in connection
with the affairs of a
State; or
(b) in the case of a charge on the Consolidated Fund
of a State, the court or Commission serves any of the separate needs
of the Union or another State, or the person has served wholly or in
part in connection with the affairs of the Union or another
State,
there shall be charged on and paid out of the
Consolidated Fund of the State or, as the case may be, the
Consolidated Fund of India or the Consolidated Fund of the other
State, such contribution in respect of the expenses or pension as may
be agreed, or as may in default of agreement be determined by an
arbitrator to be appointed by the Chief Justice of India.
Article
290A Annual payment to certain Devaswom Funds
A sum of
forty-six lakhs and fifty thousands rupees shall be charged on, and
paid out of the Consolidated Fund of the State of Kerala every year
to the Travancore Devaswom Fund; and a sum of thirteen lakhs and
fifty thousand rupees shall be charged on, and paid out of the
Consolidated Fund of the State of Tamil Nadu, every year to the
Devaswom Fund established in that State for the maintenance of Hindu
temples and shrines in the territories transferred to that State on
the 1st day of November, 1956, from the State of Travancore-Cochin.
Article
291 Privy purse sums of Rulers
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