The government on Friday released Rs 1.73 trillion in tax devolution to state governments, compared to Rs 89,086 crore in December 2024. "A higher amount is being devolved this month to enable states to accelerate capital spending and finance their development and welfare-related expenditures," the finance ministry said in a statement.
States with the greatest allocation are Uttar Pradesh, Bihar, Madhya Pradesh, and West Bengal. The Budget estimates for FY25 put states' contribution at Rs 12.2 trillion, an increase of more than 10.4% over the amount devolved under the revised estimates for FY24.
Normally, money from the divisible tax pool is distributed to states in 14 annual instalments: 11 in 11 months and three in March.
Following the division of Jammu and Kashmir into two union territories, the 15th Finance Commission's final report suggested that 41% be transferred to the states. Prior to this, the 14th Finance Commission recommended that states receive 42% of central taxes.
However, the states' part may be reduced due to the Centre's cess and surcharge, which are not shared with the states.
The numbers issued by the Controller General of Accounts (CGA) reveal a good trend in transfers to states, which increased by 5% year on year (Y-o-Y) between April and November of FY25. The finance ministry is expected to simplify rules governing the disbursement of interest-free capital expenditure (capex) loans to states in order to boost capex utilisation in the country for FY25.
