The Government of India Act, 1935 provided for the setting up of the Federation of India comprising British Indian provinces and Indian states. However, entry into the Federation was compulsory for the Indian provinces, but optional for the Indian States.

Diarchy abolished in the provinces was proposed for the Federal Centre, the Reserved subjects, included Foreign Affairs, Defence and Ecclesiastical Affairs, to be administered through Counsellors appointed by him.

The transferred subjects were to be administered by the Governor-General, on the advice of the popular minister answerable to the Federal Legislature.