Part XII - Finance • Article

Article 276 Simplified: Taxes on professions, trades, callings and employments

Article 276 permits state governments and local bodies (like municipalities and local boards) to levy a 'Profession Tax' on individuals practicing any trade, profession, calling, or employment. To prevent double taxation of income, the Constitution caps this tax at a maximum of ₹2,500 per person per year (raised from ₹250 by the 60th Amendment Act, 1988).

Official Text

(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 State by way of taxes on professions, trades, callings and employments shall not exceed [two thousand and five hundred rupees] per annum. * * * * (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.

Simple Meaning

Explain Like Ten

State governments and local town councils can charge a small tax (up to ₹2,500 per year) on people who work, like doctors, teachers, or engineers, to help pay for local services.

Student Mode

Article 276 provides a constitutional exception to the exclusive power of Parliament to levy taxes on income (Entry 82 of List I). It empowers state legislatures and local bodies to impose taxes on professions, trades, callings, and employments. However, clause (2) restricts the maximum amount payable by any single person to ₹2,500 per annum (increased from ₹250 by the 60th Amendment, 1988) to prevent double income taxation.

Example

A salaried software engineer in Bangalore sees a monthly deduction of ₹200 on their payslip listed as 'Profession Tax,' which goes to the Karnataka state government and stays under the ₹2,500 constitutional limit.

Key Takeaway

States and local bodies can levy a profession tax, which is constitutionally capped at ₹2,500 per person per year.

FAQs

Does the profession tax cap apply to all local bodies combined?

Yes. The total amount payable by an individual to the state and all its local authorities (municipalities, district boards) combined cannot exceed ₹2,500 per year.

Does profession tax limit Parliament's income tax powers?

No, Clause (3) clarifies that state profession tax laws do not restrict Parliament's power to tax income derived from those professions.