New Delhi, Jan 10: The Union Government released a tax devolution of Rs 1,73,030 crore to state governments on Friday, up from the devolution of Rs 89,086 crore in December 2024.
A higher amount is being devolved this month to enable states to accelerate capital spending and finance their development and welfare-related expenditures, the Finance Ministry said.
As many as 26 states have been listed in the package announced on Friday. The funds released include Rs 13,017.06 crore for West Bengal, Rs 7,002.52 crore for Andhra Pradesh, Rs 6,310.40 crore for Karnataka, Rs 5,412.38 crore for Assam, Rs 5,895.13 crore for Chhattisgarh, Rs 1,436.16 crore for Himachal Pradesh, Rs 3,330.83 crore for Kerala, Rs 3,126.65 crore for Punjab, and Rs 7,057.89 crore for Tamil Nadu. Among the other states, Uttar Pradesh has got Rs 31,039.84 crore, Maharashtra Rs 10,930.31 crore, Gujarat Rs 6,017.99 crore, Madya Pradesh Rs 13,582.86 crore, Manipur Rs 1,238.9 crore, and Meghalaya 1,327.13 crore.
The tax devolution is the process of distributing the net proceeds of taxes collected by the Union government to the states. The Union government distributes taxes to states in regular instalments based on the recommendations of the Finance Commission.
The Finance Commission recommends the share of states in the total net proceeds of all taxes, including corporation tax, personal income tax, and central GST. The 15th Finance Commission recommended that 41 per cent of the Central government’s divisible tax pool be allocated to states for the period 2021-26.
This is known as vertical devolution. It also recommended criteria for distributing the funds among states, known as horizontal devolution. These criteria included “income distance” which reflects the difference in a state’s income from the state with the highest per capita income, the size of the population of the state as per the 2011 Census, and the share of dense forest in each state The strong collection of taxes in a fast-growing economy has helped the Centre to pass on more taxes to the states.
IANS