What do you understand by the three tiers system of Indian federation?

Three-Tier system means three levels of government. The Indian Constitution originally provided for a two-tier system of government.
(i) The union government or the central government and
(ii) the state government.
But, later a third-tier of federalism was added in the form of Panchayats [Rural level] and Municipalities [Urban level]. Every level enjoys separate jurisdiction.