Constitution Section 289 — Exemption of property and income of a State from Union taxation

Part XII — FINANCE, PROPERTY, CONTRACTS AND SUITS — Miscellaneous Financial Provisions

Constitutional

Summary

The property and income of a State government are generally not subject to taxes imposed by the Union government. However, the Union can impose taxes on any business or trade run by a State government, or on property or income related to that business, if Parliament passes a law allowing it. This exception does not apply to any trade or business that Parliament declares to be a normal part of government functions.

Official Text

(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.