With reference to the finance of Municipalities, consider the following statements:
- 1. Municipalities are not empowered to levy professional tax.
- 2. Municipalities cannot levy taxes on lands and buildings.
Which of the statements given above is/are correct?
1. Municipalities are not empowered to levy professional tax. This statement is incorrect. State Legislatures, under Article 243X of the Constitution, can authorize Municipalities to levy various taxes. Professional tax is a common source of revenue for urban local bodies (and sometimes rural local bodies) in many states, levied under state laws made pursuant to the powers derived from the Constitution.
2. Municipalities cannot levy taxes on lands and buildings. This statement is incorrect. Property tax (tax on lands and buildings) is the most significant and ubiquitous source of own-source revenue for Municipalities across India. Their power to levy property tax is derived from state municipal laws enacted under Article 243X.
– Article 243X empowers the State Legislature to authorize Municipalities to levy, collect, and appropriate taxes, duties, tolls, and fees.
– Property tax and professional tax are common taxes levied by Municipalities based on authorization by state laws.