Part XII - Finance • Article

Article 274 Simplified: Prior recommendation of President required to Bills affecting taxation in which States are interested

Article 274 acts as the 'State Revenue Shield.' It states that no parliamentary bill or amendment that affects state tax revenues (such as changing the tax sharing formula or altering the legal definition of 'agricultural income') can be introduced in Parliament without the President's prior recommendation. This prevents the Center from unilaterally weakening the financial autonomy of the states.

Official Text

(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 States, or which imposes any such 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 duty by reference to the net proceeds whereof sums are for the time being payable out of the Consolidated Fund of India to any State.

Simple Meaning

Explain Like Ten

This is like a lock on a gate. Parliament cannot introduce any new rule that changes state tax shares unless the President first signs a recommendation to allow it.

Student Mode

Article 274 acts as a procedural check on Parliament's legislative power regarding taxation. Any bill that varies a tax where states are interested, changes the definition of 'agricultural income,' or alters the distribution rules under Articles 268-273 requires the prior recommendation of the President to protect state fiscal sovereignty.

Example

If a member of Parliament wishes to introduce a bill that proposes to reduce the share of income tax distributed to states, the Lok Sabha cannot accept or debate the bill unless it has been recommended beforehand by the President.

Key Takeaway

Mandatory prior Presidential recommendation is required for any bill in Parliament that affects state tax revenues or changes key taxation definitions.

FAQs

What constitutes a 'tax or duty in which States are interested'?

It refers to any tax or duty where the proceeds are either assigned wholly or partly to states, or by reference to which sums are payable to states from the Consolidated Fund of India.

Why is the definition of 'agricultural income' protected under Article 274?

Because agricultural income tax is a state subject (Entry 46 of State List). Any change in the central definition of agricultural income could shrink or alter the tax base states rely on.

Quiz

Under Article 274, whose recommendation is required to introduce a bill affecting state tax interests?

Answer: The President

Which of the following is protected by the procedural requirements of Article 274?

Answer: The legal definition of 'agricultural income'