Several states have raised concerns about the way the central government devolves taxes collected from across the country. While questions remain among citizens, the process follows constitutional guidelines set by the Finance Commission.
According to the 15th Finance Commission’s recommendations, 41% of the divisible pool of central taxes is shared with states. However, not all taxes are included in this pool. Cess and surcharges are excluded, which reduces the effective share states actually receive.
Recently, the Centre released ₹1.73 lakh crore as part of tax devolution funds. Uttar Pradesh received the largest share at over ₹31,000 crore. The distribution formula considers factors such as population, geographical area, and level of development.
Interestingly, for every ₹100 collected, states receive varying amounts. Arunachal Pradesh gets the highest at ₹4,278.8, while Maharashtra receives only ₹6.8, Himachal Pradesh gets ₹153.3, Uttarakhand ₹150.8, Odisha ₹164.8, Telangana ₹43.9, Andhra Pradesh ₹40.5, Tamil Nadu ₹26.2, and Karnataka ₹12.3. The Centre maintains that these transfers strictly follow constitutional provisions and Finance Commission recommendations.
