Article 270 of Constitution of India "Taxes levied and collected by the Union and distributed between the Union and the States"
(1) Taxes on income other than agricultural income shall be levied and collected by the Government of India and distributed between the Union and the States in the manner provided in clause (2).
(2) Such percentage, as may be prescribed3, of the net proceeds in any financial year of any such tax, except in so far as those proceeds represent proceeds attributable to Union territories or to taxes payable in respect of Union emoluments, shall not form part of the Consolidated Fund of India, but shall be assigned to the States within which that tax is leviable in that year, and shall be distributed among those States in such manner and from such time as may be prescribed.
(3) For the purposes of clause (2), in each financial year
such percentage as may be prescribed of so much of the net
proceeds of taxes on income as does not represent the net
proceeds of taxes payable in respect of Union emoluments
shall be deemed to represent proceeds attributable to Union
territories.
(4) In this Article;
(a) "taxes on income" does not include a corporation tax;
(b) "prescribed" means;
(i) until a Finance Commission has been constituted,
prescribed by the President by order, and
(ii) after a Finance Commission has been constituted,
prescribed by the President by order after considering the
recommendations of the Finance Commission;
(c) "Union emoluments" includes all emoluments and pensions
payable out of the Consolidated Fund of India in respect of
which income-tax is chargeable.