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Business News/ News / India/  Centre releases 1.42 trillion in tax devolution to states
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Centre releases ₹1.42 trillion in tax devolution to states

Finance ministry says funds will allow the states to finance various social welfare measures and infrastructure development schemes

The latest proceeds from the tax devolution is in addition to the tax devolution of ₹72,961 crores released to states in February.Premium
The latest proceeds from the tax devolution is in addition to the tax devolution of 72,961 crores released to states in February.

NEW DELHI : The Centre released 1.42 trillion in tax devolution to states on Thursday, supplementing the 72,961 crore disbursed earlier on 12 February.

According to the finance ministry, the funds will allow the states to finance various social welfare measures and infrastructure development schemes. "With this release, states have received total of three instalments of tax devolution in February 2024," it added.

Uttar Pradesh led with 25,495 crore, followed by Bihar ( 14,295 crore), Madhya Pradesh ( 11,157 crore), and West Bengal ( 10,692 crore) in tax devolution for the third tranche. Smaller allocations were made to Goa ( 549 crore), Sikkim ( 551 crore), Mizoram ( 711 crore), and Nagaland ( 809 crore).

Tax devolution, a crucial revenue stream for states, involves the Centre allocating 41% of tax collection to states, according to the Finance Commission's recommendations. The funds are used for priority sector projects and developmental schemes.

The central government usually distributes tax devolution funds in 14 annual installments, comprising monthly payments, besides three additional disbursements in March.

The 15th Finance Commission, under the chairmanship of NK Singh, had recommended tax devolution ratio of 42%, which was brought down to 41% after Jammu  and Kashmir was carved out as a union territory in 2019. The Centre had accepted the recommendations of the 15th Finance Commission, allowing 41% divisible tax pool of the Centre to states through FY22-26.

The Commission's recommendations also include granting states additional borrowing capacity based on power sector reforms.

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ABOUT THE AUTHOR
Rhik Kundu
Rhik writes about the Indian economy and its crucial indicators. He is constantly navigating corporates, decoding policies, and dabbling with everything in between.
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Published: 29 Feb 2024, 11:33 PM IST
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