Question

Consider the following statements:
1. The proceed of personal income tax is shared between the Central and State Governments.
2. The proceeds of the central excise duty is not shared between the Central and State Governments.

Which of the statements given above is/are correct?

• A. Only 1
• B. Only 2
• C. Both 1 and 2
• D. Neither 1 nor 2

Answer 1

The correct option is A Only 1

Taxes on income (other than agricultural income and corporation tax) shall be levied and collected by the centre but compulsorily distributed between the centre and the states in such manner as prescribed by the president on the recommendations of the Finance Commission. The obligatory sharing of income tax is provided by Article 270 of the Constitution. As per Article 272 of the Constitution, the Central Excise duty other than on medicinal and toilet preparations shall be levied and collected by the centre but the Parliament by law can divide it between states and centre.