The states’ 41% share comes to 35% of the tax
The Sixteenth Finance Commission kept the states’ share of central taxes at 41%, and the government accepted it. In 2026-27 the states are budgeted to receive ₹15.26 lakh crore of the ₹44.04 lakh crore the Centre collects. That is 34.7%.
Both numbers are correct, and the difference between them is not an error. The 41% is a share of the divisible pool, not of the tax the Centre collects. The pool is what remains after cesses, surcharges and the cost of collection are taken out of gross tax revenue.
So “states get 41% of central taxes” — the sentence in almost every account of Indian fiscal federalism — describes a percentage of a quantity most readers have never heard of.
₹44.04 lakh crore in, three ways out
The Union Budget’s receipts table sets it out plainly. Gross tax revenue for 2026-27 is budgeted at ₹44,04,086 crore. Of that, ₹15,26,255 crore is devolved to the states and ₹28,66,922 crore is the Centre’s own net tax revenue. The three lines reconcile to the rupee.
View data table
| Line | ₹ crore | Share of gross |
|---|---|---|
| Gross tax revenue | 44,04,086 | 100% |
| Centre’s net tax revenue | 28,66,922 | 65.1% |
| Devolution to states | 15,26,255 | 34.7% |
| Residual (see note) | 10,909 | 0.2% |
41%, 34.7%, 57.8%
Depending on which quantity you divide by, the states’ share of central taxation in 2026-27 is 41%, or 34.7%, or 57.8%. All three are defensible; they answer different questions.
41% is the constitutional-formula answer: the share of the divisible pool awarded by the Finance Commission, unchanged from the Fifteenth Commission’s award. 34.7% is devolution measured against everything the Centre collects in tax. 57.8% counts all resources going to states — devolution plus grants, loans and releases under centrally sponsored schemes, which the Budget puts at ₹25,43,769 crore.
The third figure is the one that most flatters the Centre and the first is the one most often quoted. The second is the one that answers “of the tax rupee collected in this country, how much goes to the states with no strings attached?” — because devolution is untied money, and much of the rest is not.
View data table
| Measure | Numerator | Denominator | % |
|---|---|---|---|
| All transfers to states | ₹25,43,769 cr | Gross tax revenue | 57.8% |
| Finance Commission share | Divisible pool × 0.41 | Divisible pool | 41% |
| Devolution | ₹15,26,255 cr | Gross tax revenue | 34.7% |
The exclusion is the whole mechanism
The divisible pool, in the Finance Commission’s own definition, is gross tax revenue less the cost of collection and less cesses and surcharges. Cesses and surcharges are levies the Centre keeps in full. Every rupee raised that way is a rupee the 41% never touches.
The Budget does not publish a single “divisible pool” line, so its size has to be inferred. If ₹15,26,255 crore is 41% of the pool, the pool is about ₹37.2 lakh crore — roughly 84.5% of gross tax revenue, leaving some ₹6.8 lakh crore outside it. That figure is our arithmetic, not a published number, and it should be treated as an estimate: the Fifteenth Finance Commission, working from actuals, put the pool at around 82.2% of gross tax revenue.
One large exclusion is disappearing this year. The GST Compensation Cess raised ₹1,50,570 crore in 2024-25 and ₹88,000 crore in the 2025-26 revised estimates. For 2026-27 it is budgeted at zero. That is a genuine change in the composition of central taxation, and states will feel it both ways: the cess was never shareable, but it also funded compensation they received.
Last year the states were told ₹14.22 lakh crore and given ₹13.93
Devolution is a share of what is actually collected, so when collections undershoot, so does the transfer — after states have already built budgets on the number. In 2025-26 devolution was budgeted at ₹14,22,444 crore and revised to ₹13,92,971 crore, a shortfall of ₹29,473 crore. PRS attributes the wider revenue miss mainly to lower-than-budgeted receipts from income tax and GST.
View data table
| Year | Devolution to states |
|---|---|
| 2024-25 Actuals | ₹12,86,885 cr |
| 2025-26 Budget Estimate | ₹14,22,444 cr |
| 2025-26 Revised Estimate | ₹13,92,971 cr |
| 2026-27 Budget Estimate | ₹15,26,255 cr |
Eighteen states wanted 50%. The award stayed at 41%.
In submissions to the Sixteenth Finance Commission, 18 states asked for the vertical share to rise from 41% to 50%; several others asked for 45–48%. The Commission kept it at 41%, reasoning in part that much Union spending on centrally sponsored schemes reaches the states anyway, and that the Centre needs resources for defence and infrastructure.
That reasoning is exactly the 57.8% argument from section 02, and it is why the choice of denominator is not a technicality. Whether the states’ position is strong or weak depends on which of the three numbers is treated as the real one — and money that arrives tied to a scheme is not the same as money a state government can allocate itself.
The divisible pool figure here is inferred, not published. We divided devolution by 0.41. That assumes the budgeted devolution equals exactly 41% of the budgeted pool, which is how the award works but is not guaranteed to hold to the rupee in any single year’s estimates. Treat ₹37.2 lakh crore as an approximation, and note it sits above the 15th FC’s observed 82.2%.
The residual is unattributed on purpose. ₹10,909 crore of gross tax revenue is neither devolution nor the Centre’s net tax revenue. The Receipt Budget carries a line for NCCD transferred to the National Disaster Response Fund, which is of this general kind, but we have not verified that it accounts for the whole amount and have not labelled it as if we had.
Untied and tied money are not interchangeable. The 57.8% figure includes centrally sponsored schemes, which come with conditions, matching requirements and central design. Counting them alongside devolution is legitimate for asking “how much reaches states” and misleading for asking “how much do states control”.
This says nothing about which states. Vertical devolution is the split between the Centre and the states as a bloc. How the 41% is then divided among states — the horizontal formula, where income distance, population, area and forest cover do the work — is a separate question and a much more contested one.
Budget estimates, again. Every 2026-27 figure is an estimate. Section 04 is the demonstration: last year’s devolution estimate was revised down by ₹29,473 crore.
- Budget at a Glance 2026-27, Ministry of Finance. Total resources transferred to states (₹25,43,769 crore) and the aggregate receipts and expenditure figures.
- Union Budget 2026-27 Analysis, PRS Legislative Research, 1 February 2026. The receipts table used throughout: gross tax revenue, devolution, the Centre’s net tax revenue, and the GST Compensation Cess series.
- Report of the Sixteenth Finance Commission for 2026-31, Volume I. The 41% vertical share, the definition of the divisible pool, and the states’ submissions.
All percentages are ImpactMojo’s arithmetic on the published rupee figures and are shown in the data tables. The three receipt lines in section 01 reconcile exactly to gross tax revenue.
ImpactMojo Data (2026). “The states’ 41% share comes to 35% of the tax.” ImpactMojo Data Dives. Retrieved from https://impactmojo.in/DataDives/the-41-percent-that-isnt.html
Have a dataset worth digging into?
Data Dives are independent investigations built from public data. If you know a number that deserves a closer look, tell us.
Pitch a Data Dive →