FINANCE, PROPERTY, CONTRACTS AND SUITS
Chapter 1 - FINANCE
Article 264 to 267 - General
Article 264 - Interpretation
1
[264.Interpretation
In this Part, "Finance Commission" means a
Finance Commission constituted under Article 280.]
1. Substituted by the
Constitution (Seventh Amendment) Act, 1956, section 29 and Schedule, for Article
264.
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
(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
money 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
money 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
(3) No moneys out of the Consolidated Fund of India or the
Consolidated Fund of a State shall be appropriated except in accordance with
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 Slate 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 Governor1[***] 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.
1. The words "or
Rajpramukh" omitted by the Constitution (Seventh Amendment) Act, 1956,
section 29 and Schedule.
Article
268 to 281 - Distribution of Revenue between the Union
and the States
(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 Slate 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 Governor1[***] 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.
1. The words "or
Rajpramukh" omitted by the Constitution (Seventh Amendment) Act, 1956,
section 29 and Schedule.
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 any1[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.
1. Substituted by Constitution (Seventh Amendment) Act, 1956, section 29
and Schedule for "State specified in Part C of the First Schedule."
Article 268A - Service tax levied by Union and collected and appropriated by the Union and States
1[268A. Service tax levied by Union and
collected and appropriated by the Union and
States
(1) Taxes on services shall be levied by Government of
India and such tax shall be collected and appropriated by the Government of
India and the States in the manner provided in clause(2).
(2) The proceeds in any financial year of any such tax
levies in accordance with the provisions of clause (1) shall be-
(a) collected by the Government of India and the States;
(b) appropriated by the Government of India and the States,
in accordance with such principles of collection and
appropriation as may be formulated by Parliament by law.]
1. Inserted by the Constitution
(Eighty-eighth Amendment) Act, 2003, section 3.
Article 269 - Taxes levied and collected by the Union but assigned to the States
1
[(1) Taxes on the sales or purchase of goods and taxes on the consignment of
goods shall be levied and collected by the Government of India but shall be
assigned and shall be deemed to have been assigned to the Slates on or after
the 1st day of April, 1996 in the matter provided in clause (2).
Explanation--For the purposes of this clause,--
(a) the expression "taxes on the sale or purchase of
goods" shall mean taxes on sale or purchase of goods other than
newspapers, where such sale or purchase takes place in the course of
inter-State trade or commerce;
(b) the expression "taxes on the consignment of
goods" shall mean taxes on the consignment of goods (whether the
consignment is to the person making it or to any other person), where such
consignment lakes place in the course of inter-State trade or commerce.
(2) The net proceeds in any financial year of any such 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 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.]
2 [(3) Parliament may
by law formulate principles for determining when a 3 [sale or
purchase of, or consignment of, goods] takes place in the course of inter-State
or commerce.
1. Substituted by the Constitution (Eightieth Amendment) Act, 2000,
section 2, for clauses (1) and (2) (w.e.f. 9-6-2000).
2. Inserted by the Constitution (Sixth Amendment) Act, 1956, section 3.
3. Substituted by the
Constitution (Forty-sixth Amendment) Act, 1982, section 2 for "sale or
purchase of goods"(w.e.f. 2-2-1983).
Article
270 - Taxes levied and distributed between the Union and the States
1[270. Taxes levied and distributed between the Union
and the States
(1) All taxes and duties referred to in the Union List,
except the duties and taxes referred to in Articles *[268 and 269],
respectively, surcharge on taxes and duties referred to in2[Article
271 and any cess levied for specific purposes under any law made by Parliament
shall believed and collected by the Government of India and shall be
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 of any such tax or duty in any financial year shall not form part of
the Consolidated Fund of India, but shall be assigned to the States within
which that tax or duty is leviable in that year, and shall be distributed among
those States in such manner and from such time as may be prescribed in the
manner provided in clause (3).
(3) In this Article, "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;]
1. Substituted by the Constitution (Eightieth Amendment) Act, 2000
section 3, for Article 270 (w.e.f. 1-4-1996).
2. Substituted by the Constitution (Eighty-eighth Amendment) Act, 2003,
section 3.
Article 271 - Surcharge on certain duties and taxes for purposes of the
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 [Repealed]
1[272. Taxes which are levied and collected by
the Union and may be distributed between the Union
and the States
[Rep. by the Constitution (Eightieth Amendment) Act, 2000,
sec. 4 (w.e.f. 9-6-2000)]
1. The union duties of excise
including additional duties and any other tax or duty collected and distributed
by Central Government as grants-in-aid to States after 1-4-1996 and before
9-6-2000 shall be deemed to be distributed as if before 1-4-1996.
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 required 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 State, or
which imposes any 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 duly 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 determine 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 in1[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.
2[(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 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.
1. Substituted by the North Eastern Areas (Reorganisation) Act, 1971 (81
of 1971), section 71, for "Part A" (w.e.f. 21-1-1972).
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 exceed1[two thousand and five hundred
rupees] per annum:
2[***]
( 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.
1. Substituted by the Constitution (Sixtieth Amendment) Act, 1988,
section 2, for "two hundred and fifty rupees" (w.e.f. 20-12-1988).
2. Proviso omitted by the
Constitution (Sixtieth Amendment) Act, 1988, section 2 (w.e.f. 20-12-1988).
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 [Repealed]
[Rep. by the
Constitution (Seventh Amendment) Act, 1956, section 29 and Schedule.]
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 duly or
tax are, or may be, assigned to any State, provide for the manner in which the
proceeds are to be calculated, for the lime from or at which and the manner in
which any payments are to be made, for the making of adjustment 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 Stales 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;
1 [(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;]
2 [(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;]
3 [(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.
3. Sub-clause (c) relettered as
sub-clause (d) by , the Constitution (Seventy-Fourth Amendment) Act, 1992,
section 3 (w.e.f. 1-6-1993).
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 to 291 - Miscellaneous Financial Provisions
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
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 (o such Funds, received by or on behalf of the Government of the
State, their payment into the public account of the State and 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 Governor1[***] of the State.
1. The words "or
Rajpramukh" omitted by the Constitution (Seventh Amendment) Act, 1956,
section 29 and Schedule.
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
shall be paid into the public account of India
Article 285 - Exemption of property of the
(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 (I) 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 - Restrictions 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
1[***]
2[(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[(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.]]
1. Explanation omitted by the Constitution (Sixth Amendment) Act, 1956,
section 4.
2. Substituted by the Constitution (Sixth Amendment) Act, 1956, section
4, for clauses (2) and (3).
3. Substituted by the
Constitution (Forty-sixth Amendment) Act, 1982, section 3, for clause (3).
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 Stale 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--
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
1[290A. Annual payment to
certain Devaswom Funds
A sum of forty-six lakhs and
fifty thousand 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 of2[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.]
2. Substituted by the Madras
State (Alteration of Name) Act, 1968 (53 of 1968) section 4, for
"Madras" (w.e.f. 14-1-1969).
Article
291 - Privy purse sums of Rulers [Repealed]
[Rep. by the
Constitution (Twenty-sixth Amendment) Act, 1971, section 2.]
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