Constitution of India
Article 276: Taxes on professions, trades, callings and employments
Part XII — Finance, Property, Contracts and Suits (Chapter I — Finance: Distribution of Revenues between the Union and the States)
Clause (1)
WHAT IT SAYS: Despite Article 246, no State law imposing taxes on professions, trades, callings or employments for the benefit of the State or local bodies shall be invalid merely because it relates to a tax on income. WHAT IT MEANS: States and local authorities can levy profession tax even though 'income tax' is a Union subject — the overlap is expressly permitted. KEY DOCTRINE: Doctrine of Non-Invalidity on Ground of Overlap — State profession tax is a separate field from Union income tax and both can co-exist.
Clause (2)
WHAT IT SAYS: The total profession tax payable by any one person to the State or to any single local authority shall not exceed ₹2,500 per annum. WHAT IT MEANS: This is a constitutional ceiling — any State law that charges more than ₹2,500 per person per year is unconstitutional. Originally ₹250; raised to ₹2,500 by the 60th Amendment Act, 1988. The original proviso (allowing pre-Constitution taxes exceeding ₹250 to continue until 31 March 1951) was also omitted by the 60th Amendment. KEY DOCTRINE: Doctrine of Constitutional Ceiling — Parliament alone can raise this cap via constitutional amendment, ensuring States do not impose excessive burden.
Clause (3)
WHAT IT SAYS: The power of a State Legislature to levy profession tax shall not be construed as limiting in any way Parliament's power to tax income arising from professions, trades, callings and employments. WHAT IT MEANS: Parliament's domain over income tax under the Union List remains unaffected — both levels of government can tax the same person on the same source simultaneously. KEY DOCTRINE: Doctrine of Non-Exclusion of Parliamentary Power — State profession tax and Union income tax operate in distinct constitutional fields.
Constitutional Inspiration
SOURCE(S): 1. Government of India Act, 1935 — Section 142-A Original provision: Section 142-A (inserted by the India (Provincial Legislative Assemblies) Order, 1936) allowed provinces to impose profession tax up to ₹50 per annum per person, notwithstanding federal income tax jurisdiction. What India kept: Same structure — State profession tax protected from invalidity on grounds of overlap with income tax — but ceiling raised from ₹50 to ₹250 (later ₹2,500). INDIA'S SPECIFIC ADAPTATIONS: 1. Ceiling raised from ₹50 to ₹250 — Why: Framers recognized that local bodies and States needed greater revenue in independent India than under British rule. 2. Explicit protection for municipalities, district boards and local bodies added — Why: Local self-governance institutions in India were weaker and needed constitutionally secured revenue sources. 3. Non-obstante clause referencing Article 246 instead of just federal legislative lists — Why: India's distribution of legislative subjects under Article 246 and the Seventh Schedule required a clear overriding provision to prevent jurisdictional challenges.
Constituent Assembly Debate
DEBATED ON: 9 August 1949 (CAD Volume IX) Draft Article Number: 256 KEY SPEAKERS: 1. Dr. B.R. Ambedkar (Bombay) — Moved substituted Clause (1) to insert non-obstante reference to Article 217 (now Art. 246), allowing States to impose profession tax notwithstanding Union income tax jurisdiction. 2. Prof. Shibban Lal Saksena (United Provinces) — Proposed replacing ₹250 ceiling with '1% of annual income or ₹1,000', arguing this would raise local body revenue and tax the rich more. 3. Shri B.M. Gupte (Bombay) — Supported Ambedkar's draft, noting the earlier ₹50 cap under the GoI Act 1935 had rendered profession tax practically useless for local bodies. MAJOR DISAGREEMENTS: 1. Ceiling amount — Prof. Shibban Lal Saksena proposed a percentage-based or higher flat limit; multiple members opposed it, arguing percentage-based tax would encroach on the Centre's income tax domain. 2. Role of local bodies — Some members wanted more generous provisions for municipalities and district boards, while Ambedkar argued the Constitution should only create an exception, leaving allocation to State legislatures. FINAL OUTCOME: Saksena's amendment was rejected; Draft Article 256 was adopted with Ambedkar's substituted Clause (1) on 9 August 1949. AMBEDKAR'S KEY STATEMENT: Ambedkar explained that the article was only an exception to the larger principle that the Constitution would not prescribe how financial resources are allocated to local bodies — that decision rests with the States.
Landmark Judgments
LANDMARK JUDGMENTS: 1. Bharat Kala Bhandar (P) Ltd. v. Municipal Committee, Dhamangaon (1965) — SC held that profession tax collected in excess of the Article 276(2) ceiling is invalid and refundable through civil courts. 2. Ballabhadas Mathurdas Lakhani v. Municipal Committee, Malkapur (1970) — SC held that tax on professions exceeding the constitutional cap under Article 276(2) was unconstitutional; cited by 337+ subsequent cases. 3. Sudhir Chandra Nawn v. Wealth Tax Officer (1968) — SC upheld the validity of profession tax laws enacted by State Legislatures, reiterating that Article 276(1) protects such laws from challenge on income-tax grounds. 4. Karnataka Bank Ltd. v. State of Andhra Pradesh (2008) — SC upheld treating each branch of a company as a separate 'person' for profession tax, so long as per-branch levy does not exceed ₹2,500; confirmed State legislative competence under Entry 60, List II. NOTABLE DISSENTS (if any): — No widely reported dissents in the major Article 276 cases. SCHOLARS & JURISTS: 1. D.D. Basu — Noted that Article 276 corresponds to Section 142-A of the GoI Act 1935 and creates a constitutionally protected field of State taxation distinct from Union income tax. 2. M.P. Jain — Observed that the constitutional ceiling mechanism under Article 276(2) is a unique Indian device balancing State revenue needs with protection against excessive taxation.