Analyze the distribution of taxing powers in India, including the ₹2500 cap on profession tax and Parliament's use of residuary taxation for wealth tax.

Hard Applied Logic

Federal Distribution of Taxation

Analyze Federal Distribution of Taxation through official answer keys.

Official Question UPSC 2025

Solution & Analysis

Answer:

Quick Recall

In India's constitutional framework, State legislatures actually hold exclusive power over more taxation subjects (20) than the Union Parliament (15). However, Parliament utilizes its residuary powers to impose unlisted taxes, such as wealth and gift taxes. Notably, state-levied profession taxes are strictly capped at ₹2,500 annually.

Concept Flow Mapping

State Legislature

holds more taxing subjects than

Union Parliament

Profession Tax

is capped at

2500 rupees per annum

Wealth Tax

is imposed under

Residuary Power of Taxation

Concept Question

What is the maximum constitutional limit set on the profession tax that a state can levy on an individual per annum?

Key Takeaway

₹2,500 per annum.

Examiner's Trap

Since the Centre collects the most revenue, candidates falsely assume the Union List must have MORE taxation subjects than the State List. Furthermore, they wrongly assume famous taxes like the 'Wealth Tax' are explicitly written in the Union List, forgetting the mechanism of residuary powers.

Core Insight

While states nominally possess a higher *quantity* of taxation subjects, the Union retains the *quality* of revenue elasticity by maintaining exclusive control over major direct taxes and possessing a blank cheque for future taxes via residuary powers.