Government accepts 16th Finance Commission's recommendation to keep states' share at 41%
Presenting the Union Budget 2026-27 on 1 February 2026, Finance Minister Nirmala Sitharaman said the government had accepted the 16th Finance Commission's recommendation to retain the states' vertical share of devolution at 41%.
Summary
Presenting the Union Budget 2026-27 on 1 February 2026, Finance Minister Nirmala Sitharaman said the government had accepted the 16th Finance Commission's recommendation to retain the vertical share of devolution to states at 41%. As recommended by the Commission, ₹1.4 lakh crore has been provided to states for 2026-27 as Finance Commission grants, covering rural and urban local body grants and disaster management grants. The Commission submitted its report to the President on 17 November 2025; the report and an explanatory memorandum on action taken are to be laid in Parliament under Article 281. Under Article 270, the net proceeds of most Union taxes are shared between the Union and the states as the Finance Commission recommends.
Key facts
- Announced
- 1 February 2026, Budget speech
- Vertical devolution
- Retained at 41%
- FC grants 2026-27
- ₹1.4 lakh crore (rural and urban local bodies, disaster management)
- Report submitted
- 17 November 2025, to the President
- Laid in Parliament under
- Article 281
- Tax sharing
- Article 270
Practice MCQs 4 questions
At what level did the government, in the Budget 2026-27, agree to retain the states' vertical share of devolution as recommended by the 16th Finance Commission?
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Correct answer: C — 41%
The government accepted the 16th Finance Commission's recommendation to retain the vertical share at 41%.
How much did the Union Budget 2026-27 provide to states for 2026-27 as Finance Commission grants?
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Correct answer: D — ₹1.4 lakh crore
₹1.4 lakh crore was provided as Finance Commission grants, as recommended by the 16th Finance Commission.
Consider the following about the Finance Commission grants announced in the Budget 2026-27: 1. They include grants for both rural and urban local bodies. 2. They exclude disaster management grants, which are now funded separately. Which of the above is/are correct?
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Correct answer: A — 1 only
Only 1 is correct. The ₹1.4 lakh crore includes rural and urban local body grants and disaster management grants.
The sharing of the net proceeds of Union taxes between the Union and the states, on which the Finance Commission's 'vertical devolution' recommendation applies, is provided under which Article?
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Correct answer: A — Article 270
Article 270 provides for the net proceeds of Union taxes and duties to be distributed between the Union and the states.