16th Finance Comm submits reports to President Murmu; to be tabled in Winter Session of Par

New Delhi, Nov 17 (PTI) Chairman of the 16th Finance Commission Arvind Panagariya on Monday submitted to President Droupadi Murmu the panel's report, recommending the share of states in the net tax collected by the Centre over five years beginning April 1, 2026.

The report will be tabled in Parliament during its upcoming Winter Session from December 1 and made public thereafter.

"Members of the 16th Finance Commission, led by its Chairman, Arvind Panagariya, called on President Droupadi Murmu and submitted the Commission's report for 2026-31," Rashtrapati Bhavan said in a post on X.

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 also presented a copy of the report to Prime Minister Narendra Modi and Union Finance Minister Nirmala Sitharaman.

The 16th Finance Commission's recommendations with regard to the formula for sharing taxes for five years, starting from 2026-27 to 2030-31.

The 15th Finance Commission, under NK Singh, had recommended that states be given 41 per cent of the divisible tax pool of the Centre for a five-year period -- 2021-22 to 2025-26, which is at the same level as was recommended by the 14th Finance Commission headed by YV Reddy.

As per the terms of reference (ToR), the 16th Finance Commission was mandated to recommend the distribution of the net proceeds of taxes between the Union and the States as well as the allocation between the States of the respective shares of such proceeds, grants-in-aid to States, and review arrangements on financing Disaster Management initiatives, among others.

In a statement, the Finance Ministry said that in its tenure, the 16th Finance Commission analysed the finances of the Union and States in detail and has come up with a report after wide-ranging consultations with the central government, state governments, and local governments.

The commission also held consultations with chairpersons and members of previous Finance Commissions, academic institutions of eminence, multilateral institutions, Advisory Council to the Commission, and other domain experts.

The report of the commission has two volumes, where Volume I contains the recommendations as per the ToR, and the accompanying annexures are in Volume II.

The 16th Finance Commission, set up on December 31, 2023, was mandated to submit its report by October 31. It was given an extension till November 30.

The Finance Commission is a constitutional body that gives suggestions on Centre-state financial relations and is set up periodically.

According to the 2025-26 Budget documents, the Centre is projected to transfer Rs 14.22 lakh crore to states as their share in taxes, out of the Rs 42.70 lakh crore total tax that the central government has budgeted to collect this fiscal. The devolution of central taxes is much lower than 41 per cent of the total tax collected, as the total tax collection includes cesses and surcharges that are not part of the divisible pool.

Historically, finance commissions have determined states' share in central taxes based on a weighted sum of population, area, demographic performance, fiscal effort, income distance and forest cover.

The issue has long been a point of friction between the Centre and the states, particularly Opposition-ruled ones, saying they have not received their fair share.

Southern states have also objected to the use of population as a criterion for devolution, arguing that it penalises them despite their success in controlling population growth.

The 15th Finance Commission had given 15 per cent weight to population, 15 per cent to area, 12.5 per cent to demographic performance, 10 per cent to forest cover and ecology and 2.5 per cent to tax and fiscal efforts. PTI JD BAL BAL