New Delhi: 16th Finance Commission chaired by Dr. Arvind Panagariya, submitted her report for 2026-31 to President Droupadi Murma on Monday, the finance ministry said in a statement.
The report, which has not yet been published, will be tabled in Parliament before its official release. It lays down recommendations that will guide the distribution of central funds to states over the next five fiscal years, from 2026-27 to 2030-31.
to be sure 15. Finance Commission he recommended that states receive 41% of central taxes, a 1% reduction from the 42% share proposed by his predecessor. The amendment envisaged the creation of the Union Territories of Jammu, Kashmir and Ladakh, which are no longer classified as States for the purpose of fiscal decentralization. This 1% was redistributed from the central divisible fund to the new Union territories.
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According to the finance ministry, the 16th Finance Commission, as part of its mandate, is tasked with making recommendations on the distribution of net tax revenue between the Union and the states, grants-in-aid, financial arrangements for disaster management and related matters.
“During its tenure, the XVIFC (16th Finance Commission) analyzed the finances of the Union and the States in detail and after extensive consultation with the Union Government, State Governments, Local Governments at various levels, chairmen and members of the previous organisations, prepared the report. Finance Commissionacademic institutions of eminence, multilateral institutions, the commission’s advisory board and other experts in the field,” the statement said.
The report will be published in two volumes, the first containing the core recommendations and the second containing detailed annexes and supporting data.
Indeed, most states in their submissions to the 16th Finance Commission have sought a larger share of central taxes and pushed for an increase in decentralization from 41% to 50%, arguing that increased funds are essential to address poverty, fund infrastructure and boost local economies.
Richer states, including Tamil Nadu, Maharashtra, Karnataka, Telangana and Gujarat, highlighted their contribution to national growth.
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Tamil Nadu has proposed introducing a 15% weightage for the state’s contribution to GDP, while reducing the “income gap” criterion that favors poorer states from 45% to 35%. Maharashtra has proposed reducing it to 37.5%.
Demands came not only from richer states. Hill and border regions such as Himachal Pradesh, Uttarakhand, Jammu and Kashmir and several northeastern states have urged the commission to increase fiscal flexibility, citing high costs of administration in difficult terrain and recurring natural disasters.
“During the consultations, disaster-prone states urged the 16th Finance Commission to take targeted measures to strengthen economic resilience in high-risk areas and reduce development gaps with other states,” said a person familiar with the discussions.
“States have also urged the Commission to relax the borrowing limits to give them more flexibility,” the person said.
Under current rules, states can borrow up to 3% of their gross state domestic product (GSDP), with an additional 0.5% allowed for those who meet reform targets, particularly in the power sector.
States with naturally disaster-prone areas have also argued that current limits leave them little room to rebuild or adapt to growing climate risks, he added.
Certainly, recurring natural disasters, from floods in the North to cyclones along the East Coast, have exposed the fiscal vulnerabilities of many states and underscored the need for a more climate-resilient transmission system.
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The 16th Finance Commission may have to deviate slightly from the standard parameters in calculating the country’s revenue share, in line with the requirements of more developed states, said Manoj Panda, member of the 16th Finance Commission. Mint in an interview in July.
“The big debate that has come up is from the developed states in western India and also in southern India, is that they are contributing more to the overall tax kitty of the country, but they are not getting adequate returns,” Panda said.
“Of course there must be some give and take in any federation. Weaker states must be supported, but developed states say that low-income states cannot be supported more than a point,” he added.
