Taxes on professions, trades, callings and employments

Draft Article 256, Draft Constitution of India 1948

(1) Notwithstanding anything in article 217 of this Constitution but subject to the provisions of clauses (2) and (3) of this article, the Legislature of a State shall have power to make laws with respect to taxes on professions, trades, callings and employments for the benefit of the State or of a municipality, district board, local board or other local authority therein.

(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 hundred and fifty rupees per annum:

Provided that, if in the financial year immediately preceding the commencement of this Constitution there was in force in any State or any such municipality, board or authority, a tax on professions, trades, callings or employments, the rate, or the maximum rate, of which exceeded two hundred and fifty rupees per annum, such tax may continue to be levied until provision to the contrary is made by Parliament by law, and any law so made by Parliament may be made either generally or in relation to any specified States, municipalities, boards or authorities.

(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 276, Constitution of India 1950

(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 Stale by way of taxes on professions, trades, callings and employments shall not exceed two hundred and fifty rupees per annum:

⁠Provided that if in the financial year immediately preceding the commencement of this Constitution there was in force in the case of any State or any such municipality, board or authority a tax on professions, trades, callings or employments the rate, or the maximum rate, of which exceeded two hundred and fifty rupees per annum, such tax may continue to be levied until provision to the contrary is made by Parliament by law, and any law so made by Parliament may be made either generally or in relation to any specified States, municipalities, boards or authorities.

(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.

Draft Article 256 (Article 276, Constitution of India 1950) was debated on 9 August 1949. It empowered the State Legislatures to make laws on specific subjects. It also stated that this power given to the State legislature under the Draft Article did not limit Parliament’s taxation powers. This Draft Article prescribed an upper limit for the amount payable by a person to the State or any other local authority.

A member proposed that the upper limit for the total amount payable by one person to the State or other authority should be changed to ‘one percent of their annual income‘ or ‘one thousand rupees‘. This, he claimed, would be a source of income for local bodies who practically had no finances. Further, it would allow the rich to be taxed higher and would reduce the burden on the poor.

This amendment was opposed by multiple members. One Member contended that the amendment would mean that tax could be collected from a person’s income which would be an encroachment on the Centre’s taxation powers and source of revenue (income tax). The Chairman of the Drafting Committee also turned down the amendment and argued that the Draft Article was only an exception to the larger principle that the Constitution would not make any mention of how financial resources would be allocated to the local bodies – this would be decided by the States.

The Amendment was finally rejected and Draft Article 256 was adopted to the Constitution on 9 August 1949.