Govt releases two installments worth Rs 1.16 lakh cr of tax devolution to states

The central government on Wednesday released two installments of tax devolution to state governments amounting to Rs 1.16 lakh crore as against normal monthly devolution of Rs 58,332.86 crore.

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 of Finance said in a statement.

What is tax devolution?

One of the core tasks of a 15th Finance Commission as stipulated in Article 280 (3) (a) of the Constitution is to make recommendations regarding the distribution between the Union and the states of the net proceeds of taxes. This is the most important task of any Finance Commission, as the share of states in the net proceeds of Union taxes is the predominant channel of resource transfer from the Centre to states.

This advance release will help the states to pay pending dues and to increase allocation for spending on health and infrastructure projects.

The Centre had released Rs 8.8 lakh crore to the states in 2021-22, up from Rs 7.4 lakh crore in 2020-21 and more than Rs 6.7 lakh crore budgeted for the year. Nearly half of the Rs 8.8 lakh crore in 2021-22 was released in fourth quarter. After releasing Rs 2.4 lakh crore in February 2022, it released Rs 95,100 crore in March-end.