Centre releases tax devolution of Rs 1.73 trillion to state govts

The Centre on Friday released tax devolution of Rs 1.73 trillion to state governments against 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 in a statement.

 

Uttar Pradesh, Bihar, Madhya Pradesh, and West Bengal have been given the highest allocation.

 

Budget Estimates for the current financial year (FY25) have pegged states' share at Rs 12.2 trillion, an increase of over 10.4 per cent to the amount devolved according to Revised Estimates for FY24.

 

By norm, money from the divisible tax pool is devolved to states in 14 annual instalments –  11 in 11 months and three in March.

 

The final report of the 15th Finance Commission had recommended the transfer of 41 per cent to the states after Jammu and Kashmir was carved out into two union territories. Prior to this, the 14th Finance Commission had recommended the devolution of 42 per cent of central taxes to states.

 

The states’ share, however, can be lower due to cess and surcharge imposed by the central government, which are not shared with states.

 

A positive trend was seen in the transfer to states which registered annual growth of 5 per cent in the April to November of FY25, according to data released by the Controller General of Accounts.

 

The finance ministry is expected to relax norms for the release of interest free capital expenditure loans to states in a bid to push capex utilisation for FY25.