The equity premium puzzle is found during the test of the Consumption-based Capital Asset Pricing Model (CCAPM) with aggregate consumption data. Because of income disparity, many consumers lack financial assets to intertemporally allocate their consumptions under income constraints. Thus, it is likely to lead to a specification error by employing aggregate consumption data to test the CCAPM. This paper examines the impacts of the economically constrained (low-income) consumers and unconstrained (high-income) consumers on the CCAPM using urban consumption expenditures in China delineated by consumer income, and tests the income constraint hypothesis. The empirical results show that the CCAPM is not more consistent with the consumption pattern of the higher-income consumers. Including the income constraint into the analyses of the consumption and asset returns does not unravel the equity premium puzzle.