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14th Finance Commission: Share of States in the Union Tax Revenue

17-APR-2018 18:30
    14th Finance Commission

    As we know that most of the taxes in India are imposed and collected by the Union government and states government are left with very limited sources of the income to run their administration. That is the reason that article 280 of the Indian Constitution requires the composition of the Finance Commission in every five years so that the states can get a reasonable part in the tax revenue of the union government.  The 14th Finance Commission of India is constituted in the chairmanship of the former RBI governor Mr. Y.V. Reddy for the period of April 1, 2015 to March 31, 2020.

    The 14th Finance Commission has recommended a record 10% increase in the states' share in the Union taxes to 42% as compared to the 13th Finance Commission. The total devolution to states during the five year (2015-20) period will be Rs 39.48 lakh crore.

    Criteria and weights for the horizontal distribution of the tax is as follows;


     Weight (%)

     1. Income Distance


     2. Population (1971)


     3. Area


     4. Demographic Change (2011)


     5. Forest Cover


     The share of the States in the Union Tax Revenue is as follows;


     Share of States in the Union Tax Revenue (%)

     1.  Andhra Pradesh


     2.  Arunachal Pradesh


     3.  Assam


     4.  Bihar


     5.  Chhattisgarh


     6.  Goa


     7.  Gujarat


     8.  Haryana


     9.  Himachal Pradesh


     10. Jammu & Kashmir


     11. Jharkhand


     12. Karnataka


     13. Kerala


     14. Madhya Pradesh


     15. Maharashtra


     16. Manipur


     17. Meghalaya


     18. Mizoram


     19. Nagaland


     20. Odisha


     21. Punjab


     22. Rajasthan


     23. Sikkim


     24. Tamil Nadu


     25. Telangana


     26. Tripura


     27. Uttar Pradesh


     28. Uttarakhand


     29. West Bengal


     All states


    In the recommendations of the 14th Finance Commission, the share of the 9 states has decreased as compared to the recommendations of the 13th Finance Commission. These states are Andhra Pradesh (including Telangana), Assam, Bihar, Himachal Pradesh, Odisha, Rajasthan, Tamil Nadu, Uttar Pradesh and Uttarakhand.

    The above table is depicting that Uttar Pradesh (17.959%) has the biggest share in the taxes of union government followed by the Bihar (9.665%) and Madhya Pradesh (7.548%).

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