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The Ministry of Finance on Wednesday released two installments of tax devolution to State Governments. The Ministry has transferred two installments together amounting to 1,16,665.75 crore as against normal monthly devolution of Rs.58,332.86 crore.

The changed devolution is part of Centre's commitment to ensure that States have enough money to accelerate their capital and development expenditure. 

"This is in line with the commitment of Government of India to strengthen the hands of States to accelerate their capital and developmental expenditure" the ministry said in a press release.

According to a report released by Investment Information and Credit Rating Agency of India (ICRA) in May, the tax devolution by the central government is likely to increase to 9.3 lakh crore. This will exceed the budged estimate of 8.2 lakh crore by 1.1 lakh crore.

The 2021-22 devolution was also higher by 2.8 %, (7.4 lakh crore to 8.1 lakh crore). 

What is Tax Devolution?

 

Tax devolution is one of the core tasks of the 15th Finance Commission constituted under Article 280 (3) of the Constitution. The commission makes recommendations regarding the distribution of net proceeds of taxes between the Union and the States.

In November 2017, the President of India appointed NK Singh as the chairperson of the 15th Finance Commission. The recommendations it makes will apply to the five years from 2021–2022 through 2025–2026.

 

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