Which of the following taxes is levied by the Gram Panchayats?

The correct answer is C) Tax on Local Fairs. Article 243H, inserted by the 73rd Amendment in 1992, allows the state legislature to empower Panchayats to levy, collect and appropriate taxes, duties, tolls and fees. Under this power, state Panchayati Raj laws, including the UP Panchayat Raj Act, 1947, let Gram Panchayats levy taxes and tolls on fairs and melas held within their area.

• A) Sales Tax: A state levy on the sale of goods, under the State List. It is not a Panchayat tax.
• B) Land Revenue Tax: A state levy collected through the revenue administration (Collector and Patwari machinery), not by Gram Panchayats.
• D) Income Tax: A Union levy under Entry 82 of the Union List, collected by the Centre.

The concept is fiscal decentralisation at the third tier. Panchayats have a constitutional right to tax, but the actual scope is decided state by state, which is why local revenue powers vary so widely. This links to Mains GS-II (federal structure, local governance) and GS-III (resource mobilisation at the local level).

Trap: Candidates pick Land Revenue because villages are associated with land records, but land revenue is a state function.