Article 278 of the Indian Constitution deals with "Agreement with States in Part B of the First Schedule with respect to certain financial matters".
🔹 Full Explanation:
Originally, Article 278 provided for agreements between the Government of India and the former Part B States (like Hyderabad, Madhya Bharat, Mysore, etc.) regarding:
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The payment of certain taxes (like income tax or duty of excise) collected by the Union Government.
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The distribution of revenues between the Union and those Part B States.
This was a temporary and transitional provision made during the reorganization of states after independence.
🔄 Current Status:
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Article 278 has been repealed by the Constitution (Seventh Amendment) Act, 1956, when the classification of states into Part A, B, C, and D was abolished.
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Now, Article 280 and the Finance Commission handle such financial matters and revenue distribution.
📌 Summary Chart:
| Feature | Details |
|---|---|
| Article Number | 278 |
| Subject | Financial agreements with Part B States |
| Purpose | Distribution of income tax and excise duties between Union and States |
| Applicable to | Part B States (like Hyderabad, Mysore, etc. – now obsolete) |
| Repealed by | 7th Constitutional Amendment Act, 1956 |
| Present Relevance | No longer in force; replaced by modern federal finance provisions |
Here's a timeline chart showing the evolution of revenue distribution in India from Article 278 to the modern Finance Commission system:
🕰️ Timeline Chart: Evolution of Revenue Distribution in Indian Constitution
| Year | Event / Provision | Description |
|---|---|---|
| 1950 | Article 278 introduced | Provided for agreements between the Union and Part B States for sharing taxes like income tax and excise duties. |
| 1951 | Finance Commission established (Article 280) | Created an independent body to recommend how tax revenues are distributed between Centre and States. |
| 1956 | 7th Constitutional Amendment | - Abolished Part A, B, C state classification. - Article 278 repealed as it was no longer needed. |
| Post-1956 | Revenue sharing managed by Finance Commission | From this point, revenue distribution between Centre and States governed by recommendations of the Finance Commission under Article 280. |
| Every 5 years | Finance Commissions (1st to 15th) | Various Finance Commissions make recommendations on tax devolution, grants-in-aid, and fiscal discipline. |
| 2021–26 | 15th Finance Commission | Latest Commission guiding current financial devolution till 2025–26. |
| Future | 16th Finance Commission (2026) | Will be constituted to advise for the next 5-year period. |
📝 Notes:
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Article 278 was transitional and applied only to former princely/Part B states.
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The Finance Commission ensures fair and periodic revision of financial sharing between the Centre and all States.
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This shows the move from ad-hoc agreements to a systematic, constitutional process.
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