Budget Roadmap: Finance Committee to submit report for 2026-2031; center state tax share formula sent to President Murmu – The Times of India

The 16th Finance Commission on Monday submitted its report for the five-year period 2026-2031 to President Droupadi Murmu, marking an important step in finalizing the formula that will determine how central taxes are shared with states, PTI reported.The panel, chaired by Arvind Panagariya, had been given a one-month extension from the original deadline of October 31. “Members of the 16th Finance Commission, led by its Chairman Dr. Arvind Panagariya, called on President Droupadi Murmu and submitted the Commission’s report for 2026-2031,” Rashtrapati Bhavan said in a post on X.The committee was tasked to recommend the decentralization formula and subsidies from 2026-27 onwards and toured all states and Union Territories before finalizing its views on tax distribution, revenue augmentation and budget needs.

The panel consists of full-time members Annie George Mathew and Manoj Panda, while SBI Group Chief Economic Advisor Soumya Kanti Ghosh and RBI Deputy Governor T. Rabi Sankar serve as part-time members.In conjunction with fiscal decentralization, the committee examined the framework for financing disaster management, reviewing the funds created under the Disaster Management Act of 2005.The constitutional body, constituted on December 31, 2023, succeeds the 15th Finance Commission headed by NK Singh, which had recommended that states receive 41% of the shareable pool between 2021-22 and 2025-26 – the same share proposed earlier by the 14th Finance Commission.As per Budget 2025-26 estimates, the Center is expected to transfer Rs 14.22 lakh crore to states as their tax share out of a budgeted Rs 42.70 lakh crore in total tax revenue.Successive commissions have relied on weighted criteria such as population, area, income distance, demographic performance, fiscal effort and forest cover to determine the state’s shares – an issue that has often caused friction between the Center and the Opposition-ruled states. Southern states in particular have objected to population weights, arguing that it disadvantages them because they experience lower population growth.For 2021-2026, the 15th Finance Commission had assigned a weight of 15% to population, 15% to area, 12.5% ​​to demographic performance, 10% to forest cover and ecology, and 2.5% to tax and budget efforts.