197. (1) Taxes on income other than agriculture shall be levied and collected by the Federation, but a prescribed percentage of the net proceeds in any financial year of any such tax, except in so far as those proceeds represent proceeds attributable to Chief Commissioners’ Provinces or to taxes payable in respect of Federal emoluments, shall not form part of the revenues of the Federation, but shall be assigned to the units within which that tax is leviable in that year, and shall be distributed among the units in such manner and from such time as may be prescribed:

Provided that the Federal Parliament may at any time increase the said taxes by a surcharge for Federal purposes and the whole proceeds of any such surcharge shall form part of the revenues of the Federation.

For the purposes of this sub-section, 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 Federal emoluments shall be deemed to represent proceeds distributable to Chief Commissioner’s Provinces.

(2) In this section–

“Taxes on income” does not include a tax;

“prescribed” means prescribed by Act of the Federal Parliament; and

“Federal emolument”, includes all emoluments and pensions payable out of the revenues of the Federation in respect of which income-tax is chargeable.