Home The Constitution Part XII Article 289

Art. 289 Part XII: Finance, Property, Contracts and Suits

Exemption of Property and Income of a State From Union Taxation

Exact text — Constitution of India

(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... (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.

In Plain English

What this Article actually means

The mirror image of Article 285 — this Article generally exempts state government property and income from Union taxation, maintaining the same reciprocal principle that different levels of government shouldn't ordinarily tax each other's core governmental functions. However, clause (2) lets Parliament specifically tax a state's genuinely commercial trade or business activity (as opposed to its core governmental functions), with clause (3) excluding activities incidental to ordinary government functioning from even that exception.

Why This Matters To You

How it shows up in everyday life

This is why a state government's core administrative functions and property generally aren't subject to central income tax or similar Union levies — but if a state runs something more like a genuine commercial business (rather than an ordinary government service), Parliament retains some power to tax that specific commercial activity.

Read alongside this one

Art. 285 — Exemption of Property of the Union From State Taxation

Frequently Asked

Quick answers about Article 289

Can the Union tax a state government's commercial enterprise, like a state-run business?

Potentially yes, under clause (2), if Parliament specifically legislates for it — though clause (3) protects activities genuinely 'incidental to the ordinary functions of Government' from this exception, so the line between core government function and genuine commercial trade matters a great deal here.

← PreviousArticle 288: Exemption From Taxation by States in Respect of Water or Electricity in Certain Cases Next →Article 290: Adjustment in Respect of Certain Expenses and Pensions

The text above reproduces Article 289 of the Constitution of India as amended to date, for general educational reference. It is public-domain legislative text, but we recommend cross-checking the authoritative version at legislative.gov.in or india.gov.in before relying on it for a legal matter. The explanation, examples and FAQs are general information, not legal advice — consult a qualified advocate for guidance on your specific situation.