# Constitutional Authority to Levy Income Tax

Income tax is not levied 'just because the government wants money' — it derives its power from the Constitution of India.

## The Source: Article 246 read with the 7th Schedule

Article 246 distributes legislative power between the Centre and the States through three lists in the 7th Schedule:

List	Who legislates?	Relevant Entry on Income
Union List	Central Government	Entry 82 – Tax on income other than agricultural income
State List	State Government	Entry 46 – Tax on agricultural income
Concurrent List	Both CG and SG	—

### Key takeaway

Central Government levies tax on income → enacted the Income-tax Act, 1961.
State Government alone can tax agricultural income. This is why agricultural income is exempt under the Income-tax Act, 1961.

## The Income-tax Act, 1961

Passed by Parliament under Entry 82, Union List.
Extends to the whole of India.
Effective from 1st April, 1962.

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Constitution → 7th Sch. → Union List Entry 82 → Income-tax Act, 1961 (w.e.f. 1.4.1962)

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Worked example

### Example 1

Example: A farmer in Punjab earns ₹5,00,000 from selling wheat grown on his own land. Can the Central Government tax this under the Income-tax Act, 1961?

Answer: No. Agricultural income falls under Entry 46 of the State List. Only the State Government can tax it. Under the Income-tax Act, 1961 (a Central law), agricultural income is therefore exempt.

⚠️ Common exam mistakes

Saying agricultural income is exempt 'as a relief' — it is exempt because the Centre constitutionally cannot tax it.
Confusing the effective date — the Act was enacted in 1961 but is applicable w.e.f. 1.4.1962.
Mixing up entry numbers: Entry 82 (Union – non-agri income) vs Entry 46 (State – agri income).

Bare-Act text Article 246 / 7th Schedule – Union List Entry 82 & State List Entry 46 · Constitution of India · click to expand

Article 246 of the Constitution read with Schedule VII — Entry 82 of Union List: 'Taxes on income other than agricultural income'; Entry 46 of State List: 'Taxes on agricultural income'.

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