🧾 Article 289 of the Indian Constitution
Title: Exemption of property and income of a State from Union taxation
🔍 Explanation:
Article 289 gives constitutional protection to the States by exempting their property and income from being taxed by the Union Government, with a few exceptions.
📘 Key Provisions of Article 289:
| Clause | Provision |
|---|---|
| (1) | The property and income of a State is exempt from Union taxation. |
| (2) | This exemption does not apply to income that is derived from a commercial activity carried on by the State. |
| (3) | Parliament may by law declare any trade or business carried on by the State as non-commercial, thus restoring the exemption. |
📊 Summary Chart: Article 289
| Feature | Details |
|---|---|
| Article | 289 |
| Subject | Exemption from Union taxes on State property and income |
| Who gets exemption? | State Governments |
| Who is restricted? | Union Government |
| Exception (Clause 2) | Commercial income of States can be taxed by the Union |
| Override (Clause 3) | Parliament can declare a trade/business as non-commercial to retain exemption |
| Purpose | To maintain fiscal federalism and protect State revenues |
🧠 Why Article 289 is Important:
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Balances the financial powers of Union and States.
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Prevents the Centre from taxing core government functions of States.
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Ensures that States can operate freely without undue tax burdens.
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Encourages clear distinction between government functions vs. commercial activities.
Here is a comparison chart of Article 285 and Article 289 of the Indian Constitution — both deal with inter-governmental tax exemptions, but they operate in opposite directions:
📊 Comparison: Article 285 vs Article 289
| Aspect | Article 285 | Article 289 |
|---|---|---|
| Title | Exemption of Union property from State taxation | Exemption of State property/income from Union taxation |
| Direction of Exemption | Protects Centre from being taxed by the States | Protects States from being taxed by the Centre |
| Who is Exempted? | Union Government | State Government |
| Who is Restricted? | State Governments | Union Government |
| Subject of Exemption | Tax on property of the Union | Tax on property or income of the State |
| Exception Clause | Taxes existing before 26 Jan 1950 may continue until repealed | Income from commercial activities of the State is taxable |
| Override Power of Parliament | ✅ Can authorize State taxation of Union property | ✅ Can declare a State activity non-commercial to exempt it |
| Purpose | To maintain Union’s fiscal sovereignty | To preserve State autonomy and financial independence |
| Examples | States cannot tax Union railway land, govt. offices | Centre cannot tax revenue from State electricity boards (unless commercial) |
🔁 Visual Analogy:
Article 285 → States ⛔ can't tax Union property
Article 289 → Union ⛔ can't tax State property/income (except commercial)
↘ ↙
Mutual Fiscal Immunity Between Centre & States
🧠 Why This Comparison Matters:
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Shows the principle of cooperative federalism in taxation.
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Protects both levels of government from overreach by the other.
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Ensures functional independence in fiscal matters while allowing Parliament limited overriding powers.
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