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Tuesday, February 27, 2024

Centre Releases Additional ₹72,961.21 Crore in Tax Devolution

According to the finance ministry, the Union Government has authorized the release of an additional payment of tax devolution equal to 72,961.21 crore ahead of the upcoming holidays and New Year.

According to the statement, the action intends to strengthen state governments’ hands in financing different social welfare programs and infrastructure development plans.

This is in addition to the tax devolution payment due to states on January 10, 2024 and the instalment of 72,961.21 crore previously issued on December 11, 2023, according to the statement.

Furthermore, the national government has already given 900 crore for flood relief in Tamil Nadu.

Nirmala Sithraman, Finance Minister, informed reporters on Friday that the national government has already allocated 900 crore for flood support.

According to statistics given by the ministry, the additional payment of tax devolution authorized by the Centre comprises a  ₹2,967.10 crore share of Tamil Nadu, according to a statement from the finance ministry.

What is Tax Devolution?

In India, tax devolution refers to the transfer of tax income between the national and state governments. It is a constitutional system set up to distribute the profits of various taxes between the Union and the states.

The Finance Commission is in charge of recommending how to distribute the net profits of taxes between the Union and the states, which is the most significant responsibility of any Finance Commission.

The percentage of central taxes paid by states is suggested to be 41% in 2021-26, the same as in 2020-21.

The Finance Commission has proposed a 12.5% weightage for demographic performance, a 45% weightage for income, a 15% weightage for population and area, a 10% weightage for forest and ecology, and a 2.5% weightage for tax and fiscal initiatives for horizontal devolution.

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