What is Article 289 of Indian constitution

www.hinsoli.com July 07, 2025

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:

Balances the financial powers of Union and States.
Prevents the Centre from taxing core government functions of States.
Ensures that States can operate freely without undue tax burdens.
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Exception Clause	Taxes existing before 26 Jan 1950 may continue until repealed	Income from commercial activities of the State is taxable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:

Shows the principle of cooperative federalism in taxation.
Protects both levels of government from overreach by the other.
Ensures functional independence in fiscal matters while allowing Parliament limited overriding powers.