Finance Minister Nirmala Sitharaman on Wednesday told the Lok Sabha that the Centre will transfer ₹25.44 lakh crore to states in the financial year 2026-27, including their share of taxes and funds allocated under centrally sponsored schemes.
Replying to the Budget discussion in Parliament, Sitharaman said the government is strictly adhering to the Finance Commission’s recommendations on tax devolution and ensuring that states receive their rightful share of national resources.
Significant Increase in Funds for States
The Finance Minister said that the total resource transfer to states in the upcoming fiscal year would include tax devolution as well as releases under centrally sponsored schemes, highlighting the government’s commitment to fiscal federalism.
“Total resources to be transferred to the states, including the devolution of states’ share in taxes and releases under centrally sponsored schemes in 2026-27, are estimated at ₹25.44 lakh crore. This entails an increase of ₹2.70 lakh crore,” Sitharaman told the House.
She added that this substantial increase reflects the Centre’s continued efforts to strengthen states’ financial capacity and support their development programmes.
Centre Defends Tax Devolution Policy
Sitharaman also asserted that the Union government has complied with the Finance Commission’s formula for tax sharing, countering opposition claims that states were being deprived of funds. The Centre’s resource transfer includes both untied funds through tax devolution and tied funds through centrally sponsored schemes.
Boost to State Finances
The increased allocation is expected to bolster state government budgets, helping them fund infrastructure projects, welfare schemes, and social sector programmes. Analysts say the rise in transfers also reflects higher tax collections and growing government expenditure commitments.