16th Fin Comm retains States’ tax share at 41%

New Delhi: The 16th Finance Commission, chaired by former NITI Aayog Vice-Chairman Arvind Panagariya, has recommended retaining states’ share in Central taxes at 41 per cent for the five-year pe-riod starting April 1, 2026.

Finance Minister Nirmala Sitharaman, presenting the Budget, said the gov-ernment has accepted the recommendation to maintain the vertical devolution share at

41 per cent.

For FY27, the Centre will provide Rs 1.4 lakh crore to states as Finance Commission grants, covering Rural and Urban Local Body grants as well as Disaster Management grants. The 16th Finance Commis-sion’s report was tabled in Parliament by Sitharaman on Sunday.

The Commission, established under the Constitution, determines the formula for tax devolution be-tween the Centre and states, excluding cesses and surcharges.

The 16th Finance Commission was set up on December 31, 2023. Along with Panagariya, members included retired bureaucrat Annie George Mathew, economist Manoj Panda, SBI Group Chief Economic Advisor Soumya Kanti Ghosh, RBI Deputy Governor T Rabi Sankar & Secretary Ritvik Pandey.