The Central government on Saturday, March 11, 2023 released the 14th instalment of tax devolution of more than Rs.1.40 lakh crore to states.

"The Union Government has released the fourteenth instalment of tax devolution to State Governments amounting to Rs.1,40,318 crore on march 11, as against normal monthly devolution of Rs 70,159 crore," the Finance Ministry said in a statement on Saturday.

Notably, Uttar Pradesh received the highest instalment of Rs.24,783 crore among all states.

This is in line with the commitment of the Union government to strengthen the hands of states to accelerate their capital and developmental expenditure, the central government said.. Currently, 41% of taxes collected by the Centre is devolved in 14 instalments to states during a fiscal year.

What is Tax Devolution: One of the core tasks of a Finance Commission as stipulated in Article 280 (3) (a) of the Constitution is to make recommendations regarding the distribution between the Union and the states of the net proceeds of taxes. This is the most important task of any Finance Commission, as the share of states in the net proceeds of Union taxes is the predominant channel of resource transfer from the Centre to states.

Central government transfers to states include devolution from a divisible pool of taxes, transfers towards Centrally Sponsored Schemes, Finance Commission grants, other transfers and capex loans. Of these, tax devolutions accounts for over 70%. Tax devolved to States are untied funds and hence states are free to spend them as per their discretion.

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