Govt transfers Rs 1.18 trn as third instalment of tax devolution to states

The Finance Ministry on Monday said it had transferred Rs 1.18 trillion in taxes to states as the third instalment, double of the normal monthly devolution of Rs 59,140 crore.

The money has been released to the states to help them speed up capital spending, finance their development, welfare-related expenditure, and to make resources available for priority projects and schemes. 

The ministry said the amount included one advance instalment in addition to the regular one due in June 2023. By norm, money from the divisible tax pool is devolved to states in 14 annual instalments: 11 in 11 months and three in March.

According to the 15th Finance Commission’s recommendations, the Centre expects to transfer Rs 10.21 trillion to states this year as per the Budget Estimates for 2023-24. Of this, the government has transferred Rs 2.37 trillion to states so far in this fiscal year.

In the third instalment, Uttar Pradesh has received the highest devolution of tax of Rs 21,218 crore followed by Bihar (Rs 11,897 crore), Madhya Pradesh (Rs 9, 285 crore), and West Bengal (Rs 8,898 crore). 

The size of the instalment to the states is also a reflection on the Centre’s revenues. The devolution to states under the 15th Finance Commission is to be about Rs 9.48 trillion on account of increased tax receipts during the year and adjusting the amount of approximately Rs 32,600 crore on account of prior period adjustments payable by the Centre to the states.