The Sixteenth Finance Commission
The report for 2026–31 was submitted by the Sixteenth Finance Commission, chaired by Arvind Panagariya, to President Droupadi Murmu.
Role and Function
- The Finance Commission is a constitutional body established every five years.
- It is responsible for formulating the distribution formula for net tax proceeds between the Centre and states, as well as among states and local bodies.
- Currently, India shares 41% of federal taxes with states, as recommended by the Fifteenth Finance Commission.
Consultation Process
- Extensive consultations were conducted with:
- Union, state, and local governments
- Chairpersons and members of previous commissions
- Academic and multilateral institutions
- The commission’s Advisory Council
- Other domain experts
Publication of the Report
The report will be made public once tabled in Parliament by the finance minister under Article 281.
Mandate
- Recommend distribution of net tax proceeds between the Union and states.
- Allocate shares among the states.
- Suggest measures to augment the Consolidated Fund of each state for panchayats and municipalities.
Extended Tenure and Examination Process
The commission’s tenure was extended to November 30. It was initially constituted on December 31, 2023.
The finance ministry will examine the recommendations before the next Union Budget. Centrally sponsored and central sector schemes were aligned with Finance Commission cycles to match the resources of the Centre and states.
Future Cycle
The Sixteenth Finance Commission’s cycle begins on April 1, 2026. Schemes ending then, and proposed for continuation into the next cycle, will undergo an appraisal and approval process based on an outcome review.
