Tax Devolution
Receipts Intermediateकर हस्तांतरण
Definition
Tax devolution is the transfer of a share of Central tax revenue to state governments as recommended by the Finance Commission. The current (15th) Finance Commission recommends 41% of the divisible pool of Central taxes be transferred to states. This is a constitutional obligation, not a discretionary grant.
Formula
How Tax Devolution Appears in India's Budget
States' share of Central taxes is the single largest transfer from Centre to states, estimated at over Rs 13 lakh crore in 2026-27.
Related Budget Terms
Why Tax Devolution Matters
Understanding tax devolution is essential for anyone following government finances, preparing for competitive exams, or analysing India's economic policy. This concept directly affects how the government allocates resources and plans its fiscal strategy.
In the context of India's Union Budget 2026-27, with a total size of Rs 53.47 lakh crore, terms like tax devolution help citizens and analysts evaluate whether the government is on the right fiscal path. The numbers in the budget are only meaningful when one understands the underlying concepts.
For UPSC aspirants, tax devolution is frequently tested in both Prelims and Mains, particularly in Paper III (Economic Development). For CA and MBA students, this concept appears in public finance and macroeconomics courses.
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