The 74th Constitutional Amendment Act, 1992, inserted Part IX-A (Articles 243P–243ZG) and the Twelfth Schedule into the Constitution, granting Urban Local Bodies constitutional status for the first time. Passed by Parliament in December 1992 and enforced from 1 June 1993, it mandated regular elections, SC/ST and women's reservations, State Finance Commissions, and District and Metropolitan Planning Committees. Despite this framework, critics note that states have not adequately devolved functions or finances to municipalities.

Before 1992, urban local bodies operated purely under state municipal statutes, meaning their structure, powers, elections, and finances varied widely and were wholly subject to state discretion. The Constitution placed local government in the State List (Entry 5), offering no protection against prolonged supersession, irregular elections, or financial starvation of municipalities.

The 74th Amendment fundamentally changed this by constitutionalising urban self-government. It added Part IX-A, creating a mandatory three-tier municipal structure: Nagar Panchayat (transitional rural-to-urban areas), Municipal Council (smaller urban areas), and Municipal Corporation (larger urban areas). The Governor determines category based on population, density, revenue, and non-agricultural employment.

Key constitutional guarantees now include: a five-year tenure for municipalities, elections within six months of dissolution, mandatory SC/ST seat reservation proportional to population, a minimum one-third reservation for women (including SC/ST women), and a State Election Commission with independent superintendence over municipal elections.

The Twelfth Schedule lists 18 functions that may be transferred to municipalities — covering urban planning, land use, roads, water supply, public health, education, and poverty alleviation — but the word 'may' is critical: devolution is discretionary, not mandatory, which is the central criticism of the Act.

The State Finance Commission (Article 243Y) reviews municipal finances and recommends revenue sharing, while District Planning Committees (Article 243ZD) and Metropolitan Planning Committees (Article 243ZE) integrate urban and rural planning at district and metro levels respectively. Part IX-A does not automatically apply to Scheduled Areas or the Darjeeling Gorkha Hill Council.