New Delhi: The Union Government has allocated a total of ₹1,73,030 crore in tax devolution to state governments, with Kerala receiving ₹3,330.83 crore as its share. This marks a notable increase compared to December 2024’s devolution of ₹89,086 crore. The higher amount aims to empower states to expedite capital investments and meet welfare-related expenditure.
Tax devolution is a constitutional process for distributing tax revenues between the central and state governments. It ensures equitable allocation, guided by the recommendations of the Finance Commission. For the 2021-2026 period, 41% of the central taxes are earmarked for states—a slight decrease from the 42% recommended for 2015-2020, adjusted to accommodate the newly formed Union Territories of Jammu and Kashmir and Ladakh.
Among states, Uttar Pradesh received the highest share at ₹31,039.84 crore, followed by Bihar with ₹17,403.36 crore and West Bengal with ₹13,017.06 crore. Maharashtra and Rajasthan were allocated ₹10,930.31 crore and ₹10,426.78 crore, respectively. Smaller states like Goa and Sikkim received ₹667.91 crore and ₹671.35 crore.
The allocation formula considers multiple factors: income (45%), demographic performance (12.5%), population and area (15% each), forest and ecology (10%), and tax and fiscal efforts (2.5%). This mechanism aims to ensure fairness while supporting states in driving development and welfare initiatives. This latest allocation underscores the Centre’s commitment to fostering cooperative federalism and empowering states to accelerate economic growth and welfare initiatives. By providing states with enhanced financial resources, the government aims to ensure balanced regional development, strengthen infrastructure, and support welfare programs tailored to the unique needs of each state. For Kerala, the funds are expected to boost critical sectors like healthcare, education, and infrastructure development, ensuring that the state continues on its path of progressive growth and inclusive development.
