The Constitution of India
Article 276
Taxes on professions, trades, callings and employments
(1) Notwithstanding anything in article 246, no law of the Legislature of a State relating to taxes for the benefit of the State or of a municipality, district board, local board or other local authority therein in respect of professions, trades, callings or employments shall be invalid on the ground that it relates to a tax on income.
(2) The total amount payable in respect of any one person to the State or to any one municipality, district board, local board or other local authority in the State by way of taxes on professions, trades, callings and employments shall not exceed 1 [two thousand and five hundred rupees] per annum.
(3) The power of the Legislature of a State to make laws as aforesaid with respect to taxes on professions, trades, callings and employments shall not be construed as limiting in any way the power of Parliament to make laws with respect to taxes on income accruing from or arising out of professions, trades, callings and employments.
Why this exists
Under India's constitutional scheme, taxes on income are normally a Union subject (List I), while states handle more local matters. But long before independence, municipalities and local bodies in India commonly levied small 'profession taxes' on traders, lawyers, doctors, and employees to fund local services. Article 276 was added to protect this established practice: it clarifies that such state/local taxes are valid even though they technically touch upon income, as long as they stay within a modest cap, originally left to be fixed by law but now stated as Rs. 2,500 per year.
How courts read it
Courts have generally treated Article 276 as a narrow, practical exception carved out for professional taxes, distinguishing them from the Union's power to tax income under Entry 82 of List I. Judicial decisions have emphasized that as long as the tax is genuinely on the exercise of a profession, trade, calling, or employment (not disguised as an income tax exceeding the cap), it remains valid. The ceiling amount itself has been amended over time by Parliament through constitutional amendments, most recently raising it from Rs. 250 to Rs. 2,500.
Common misconceptions
- Myth: Profession tax and income tax are the same thing.
Fact: They are different. Income tax is collected by the Union government based on how much you earn. Profession tax is a much smaller, capped fee that states or local bodies charge simply for practicing a profession, trade, or job, and Article 276 allows both to exist together. - Myth: States can charge any amount they want as profession tax.
Fact: Article 276(2) sets a strict cap: the total profession tax any one person pays to the state or a local body cannot exceed Rs. 2,500 per year.