Finance Commission submitted report on tax distribution to President

President Droupadi Murmu receives the 16th Finance Commission’s report for 2026-31 from Commission’s Chairperson Arvind Panagariya, in New Delhi
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The 16th Finance Commission on Monday submitted its report containing recommendations for distribution of taxes between Centre and States. The recommendations will be known at the time of the presentation of Union Budget in February next year.

“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 , is a constitutional body formed by the President to give suggestions on Centre-State financial relations. Recommendation related with devolution is normally implemented as it is by the government.

The 16th Commission was constituted in November-December 2023 normally takes about two years to make their recommendations, post acceptance by the by the government, would cover the period of five years commencing April 1, 2026. Article 280(1) of the Constitutions lays down that the modalities for setting up of a Finance Commission to make recommendation on the distribution of net proceeds of taxes between the Union and the States, allocation between the States of respective shares of such proceeds; grants- in-aid and the revenues of the States and measures needed to supplement the resources of the Panchayats during the award period. 

Terms of reference

According to the Terms of Reference, the Sixteenth Finance Commission was asked to give recommendations regarding the distribution between the Union and the States of the net proceeds of taxes which are to be, or may be, divided between them and the allocation between the States of the respective shares of such proceeds. It was also asked to recommend the principles which should govern the grants-in-aid of the revenues of the States out of the Consolidated Fund of India and the sums to be paid to the States by way of grants-in-aid of their revenues

Also, the Commission was asked to suggest the measures needed to augment the Consolidated Fund of a State to supplement the resources of the panchayats and municipalities in the State on the basis of the recommendations made by the Finance Commission of the State. The Commission was expected to review the present arrangements on financing Disaster Management initiatives, with reference to the funds constituted under the Disaster Management Act, 2005 (and make appropriate recommendations.

The previous commission under the chairmanship of N K Singh gave two reports. The first report, consisting of recommendations for the financial year 2020-21, was tabled in Parliament in February 2020. The final report with recommendations for the 2021-26 period was tabled in Parliament on February 1, 2021. It recommended the share of states in the central taxes for the 2021-26 period to be 41 per cent, same as that for 2020-21. 

This is less than the 42 per cent share recommended by the 14th Finance Commission for 2015-20 period. The adjustment of 1 per cent is to provide for the newly formed union territories of Jammu and Kashmir, and Ladakh from the resources of the centre.. 

Published on November 17, 2025