The financial relations between the Center and the State in India are the constituent terms of the Constitution that ensure a clear division of resources and responsibilities.

The main rules are in the areas listed in the Articles 268 to 293. The Constitution is a legal document that contains the number of specific taxes that purported to be collected by both the Center and the States.

• Tax Distribution: The Union levies and collects certain taxes such as personal income tax (except on agricultural income), customs duties, and corporation tax, which is the responsibility of the Center, while other taxes like sales tax and state excise duties are collected by the States. The taxes like central excise and service tax are the ones, which are distributed equally between the Central and the States as per the suggestion of the Finance Commission.
• Grants-in-aid: Article 275 of the Constitution authorizes the Center to give its grants-in-aid to states that are in need of it and ensure a reasonable distribution of money among the states.
• Borrowing Powers: Articles 292 and 293 deal with the borrowing powers. The Union may pull out money from the Consolidated Fund of India, if the security is good. States may get loans within India, but they will need the will of the Union in situations where they have to repay the Union before they can borrow.
• Finance Commission: Formed according to Article 280, the Finance Commission is fundamental in formulating the tax revenue division between the federal and the State Governments.

These clauses serve as guidelines for conducting fiscal federalism by urging the promotion of balanced economic growth in various parts of the country.