Exemption of property and income of a State from Union taxation
Article 289 — Exemption of property and income of a State from Union taxation
- 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.
Plain English Summary
This article states that the property and income belonging to a State government cannot be taxed by the central (Union) government. However, Parliament has the power to create exceptions for specific trades or businesses run by the State government if Parliament legislates for it.
Key Points
- State property and income are generally exempt from Union taxes.
- The Union government can impose taxes on specific trade or business activities carried out by the State government, provided Parliament allows it through law.
- This exemption does not apply to trades that are considered essential or incidental to the normal functions of the Government.
Why It Matters
This provision ensures financial autonomy for states by protecting their assets from central taxation, while still allowing the Union government flexibility to tax specific commercial activities associated with state operations.
Landmark Judgements
No major landmark judgements.