TAX DEVOLUTION FOR STATES MAINTAINED AT 41%

Finance Commission expects gross tax revenues for the period from 2021 to 2026 at Rs 135.2 lakh crore

The 15th Finance Commission in order to maintain predictability and stability of resources, especially during the pandemic, has recommended maintaining the vertical devolution at 41% – the same as in our report for 2020-21.

It is at the same level of 42% of the

divisible pool as recommended by 14th FC. However, it has made the required adjustment of about 1 percent due to the changed status of the erstwhile State of Jammu and Kashmir into the new Union Territories of Ladakh and Jammu and Kashmir.

Gross tax revenues for the 5-year period is expected to be Rs 135.2 lakh crore. Out of that, the Divisible pool

(after deducting cesses and surcharges & cost of collection) is estimated to be Rs 103 lakh crore.

States’ share at 41% of the divisible pool comes to 42.2 lakh crore for 202126 period. Including total grants of Rs 10.33 lakh crore, aggregate transfers to States is estimated to remain at around 50.9% of divisible pool. during 2021-26 period.