New Delhi: The 16th Finance Commission, headed by former Vice-Chairman of the Niti Aayog Arvind Panagariya, has recommended retaining states’ share in Central taxes at 41 per cent for the five-year period beginning April 1, 2026.
Finance Minister Nirmala Sitharaman, in her Budget speech, said, The government has accepted the recommendation of the Commission to retain the vertical share of devolution at 41 per cent.
The Centre has provided Rs 1.4 lakh crore to the states for the FY 2026-27 as Finance Commission Grants, as recommended by the commission. These include Rural and Urban Local Body and Disaster Management Grants.
The report of the 16th Finance Commission was tabled in Parliament by Sitharaman Sunday.
The Finance Commission, which has been set up under the Constitution, provides a formula for the devolution of taxes between the Centre and states.
Cesses and surcharges levied by the Centre are not part of the divisible pool.
The 16th Finance Commission was set up December 31, 2023.
Led by Panagariya, Finance Commission members — Retired bureaucrat Annie George Mathew, economist Manoj Panda, SBI Group Chief Economic Advisor Soumya Kanti Ghosh, and RBI Deputy Governor T Rabi Sankar — and Secretary to the Commission Ritvik Pandey submitted the report to President Droupadi Murmu November 17, 2025.