Cabinet Decisions: The 16th Finance Commission will have to submit its report by October 2025 and the recommendations of the 16th Finance Commission will be implemented from the new financial year 2026-27.
16th Finance Commission Update: The Cabinet meeting chaired by Prime Minister Narendra Modi has approved the Terms of Reference of the 16th Finance Commission. Information and Broadcasting Minister Anurag Thakur informed about this decision of the cabinet. He said that the 16th Finance Commission will have to submit its report by October 2025 and the recommendations of the 16th Finance Commission will be implemented from the new financial year 2026-27 starting from April 1, 2026.
The Information and Broadcasting Minister said that the division of the amount received from taxes between the Central and State Governments is to be decided in the Terms of Reference of the 16th Finance Commission. The grants to be given to the states will also be determined. Increasing the income of municipality and panchayat has also been included in the conditions. The 16th Finance Commission will submit its report by October 2025. And its recommendations will be applicable from April 1, 2026 to March 31, 2031.
The 15th Finance Commission headed by NK Singh had fixed the share of states in tax income at 42 percent, similar to the 14th Finance Commission, which was also accepted by the Central Government. There is a provision to give 42 percent of the central government tax revenue to the states during the financial year 2021-22 to 2025-26.
The responsibilities of the Finance Commission established under Article 280 of the Constitution include distribution of tax revenue and evaluation of the financial position of the Central and State Governments. Apart from this, the Finance Commission also recommends the distribution of taxes among them and decides the principles for determining the distribution of these taxes among the states. In the recommendations of the 15th Finance Commission, there was a provision for taking additional loans for the states on the basis of fiscal deficit, debt reduction for the Center and the states and reforms in the power sector.
The Central Government has announced the Terms of Reference for the 16th Finance Commission. But it is believed that the names of the Chairman and members of the 16th Finance Commission will be announced soon. The Finance Commission is given two years to submit its recommendations.
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