GK Question

polity medium true_false

Under Article 270, taxes levied and collected by the Union but distributed between Union and States include income tax (excluding agricultural income) and corporation tax, with distribution per Finance Commission recommendations balancing equity and efficiency.

  1. True
  2. False

Answer: True

Tax distribution framework: (a) Article 270: Taxes levied/collected by Union and distributed: (i) Income tax (excluding agricultural income), (ii) Corporation tax, (b) Distribution mechanism: Finance Commission recommends vertical devolution (Union-State share) and horizontal distribution (among States using criteria like population, area, income distance), (c) 15th FC (2020-25): Recommended 41% vertical devolution to States, new criteria (demographic performance, tax effort) to balance equity (needier States get more) with efficiency (rewarding reforms), (d) Distinction from other articles: Article 268 (Union duties collected/appropriated by States), Article 269 (Union taxes assigned to States), Article 271 (Union surcharge on taxes), (e) Fiscal federalism principle: Shared tax revenues enable States to fulfill constitutional obligations while maintaining national economic integration; technical mediation of political claims through independent Commission, (f) Illustrates calibrated fiscal federalism: Balance between Union's role in national economic management and States' autonomy in expenditure priorities; Finance Commission as neutral arbiter ensuring equitable, efficient resource distribution.

Topic Article 270 Tax Distribution and Fiscal Federalism
Exam Relevance Fiscal federalism tax distribution frequently asked in UPSC and SSC exams
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