1. (1) Provision may be made by rules under the Government of India Act, 1915 [5 & 6 Geo. 5 c. 61], as amended by the Government of India (Amendment) Act, 1916 [6 & 7 Geo. 5, c. 37] (which Act, as so amended, is in this Act referred to as the principal Act):-
(a) for the classification of subjects, in relation to the functions of government, as central and provincial subjects, for the purpose of distinguishing the functions of local governments and local legislatures from the functions of the Governor-General in Council and the Indian legislature;
(b) for the devolution of authority in respect of provincial subjects to local governments, and for the allocation of revenues or other moneys to those governments;
(c) for the use under the authority of the Governor-General in Council of the agency of local governments in relation to central subjects, in so far as such agency may be found convenient, and for determining the financial conditions of such agency; and(d) for the transfer from among the provincial subjects of subjects (in this Act referred to as ‘transferred subjects’) to the administration of the governor acting with ministers appointed under this Act, and for the allocation of revenues or moneys for the purpose of such administration.
(2) Without prejudice to the generality of the foregoing powers, rules made for the above-mentioned purposes may-
(i) regulate the extent and conditions of such devolution, allocation, and transfer;
(ii) provide for fixing the contributions payable by local governments to the Governor- General in Council, and making such contributions a first charge on allocated revenues or moneys;
(iii) provide for constituting a finance department in any province, and regulating the functions of that department;
(iv) provide for regulating the exercise of the authority vested in the local government of a province over members of the public services therein;
(v) provide for the settlement of doubts arising as to whether any matter does or does not relate to a provincial subject or a transferred subject, and for the treatment of matters which affect both a transferred subject and a subject which is not transferred; and
(vi) make such consequential and supplemental provisions as appear necessary or expedient; Provided that, without prejudice to any general power of revoking or altering rules under the principal Act, the rules shall not authorize the revocation or suspension of the transfer of any subject except with the sanction of the Secretary of State in Council.
(3) The powers of superintendence, direction, and control over local governments vested in the Governor-General in Council under the principal Act shall, in relation to transferred subjects, be exercised only for such purposes as may be specified in rules made under that Act, but the Governor-General in Council shall be the sole judge as to whether the purpose of the exercise of such powers in any particular case comes within the purposes so specified.
(4) – (1) The expressions ‘central subjects’ and ‘provincial subjects’ as used in this Act mean subjects so classified under the rules. Provincial subjects, other than transferred subjects, are in. this Act referred to as ‘reserved subjects’.
(2) Provision may be made by rules under the principal Act as to the conditions under which the power to raise loans on the security of allocated revenues shall be exercised.
(3) The provision in subsection (1) of section thirty of the principal Act, which enables the Secretary of State in Council with the concurrence of a majority of votes at a meeting of the Council of India to prescribe provisions or conditions limiting the power to raise money, shall cease to have effect as regards the power to raise money on the security of allocated revenues.