The 16th Finance Commission (XVI FC), chaired by Arvind Panagariya, submitted its report for the 2026–31 award period to President Droupadi Murmu on Monday, marking the culmination of nearly two years of fiscal analysis and consultations.
A copy was also presented to the prime minister and the finance minister. The recommendations cover tax devolution, grants-in-aid and other fiscal transfers for the next five years.
During its deliberations, the Commission conducted a comprehensive review of Union and state finances. It held consultations with central and state governments, local bodies, former Finance Commission members, academic institutions, multilateral agencies and other experts.
The report is divided into two volumes—Volume I containing recommendations based on the terms of reference (ToR), and Volume II comprising detailed annexures. It will be made public once tabled in Parliament.
The XVI FC was mandated to recommend the distribution of the net proceeds of taxes between the Union and states from April 1, 2026, along with reviewing disaster management financing and grant requirements.
To ground its analysis in state-specific realities, the panel visited all 28 states to assess fiscal capacities, development needs and resource gaps. Its ToR were kept narrower than those of its predecessor, reflecting states’ demand for a more focused mandate.
In their submissions, many states sought an increase in their collective share of the Centre’s divisible tax pool from 41% to 50%, citing poverty levels, demographic pressures and the need for growth-led spending. Several also pushed for reducing the 45% weight assigned to income distance in the horizontal devolution formula—Tamil Nadu proposed 35% and Maharashtra 37.5%.
Tamil Nadu, Karnataka and Gujarat additionally argued for a 15% weight for states’ contributions to national GDP. The Commission is expected to balance these competing claims while finalising the FY27–31 devolution framework.