Centre Releases an Extra ₹1.09 Lakh Crore Tax Devolution Instalment to States: How Tax Sharing Works
On 31 October 2026, the Union Government released an extra instalment of tax devolution (the states' share of central taxes) worth ₹1,09,019 crore to state governments.
This money is on top of the regular monthly instalment. It is the second additional instalment in the financial year 2026-27. The first extra instalment, of the same amount, was released on 1 August 2026.
The Ministry of Finance said the early release was made in view of the festive season. It is meant to help states speed up capital spending (spending on long-lasting assets like roads, schools and hospitals) and pay for development and welfare work.
States get 41% of the divisible pool of central taxes. The Centre normally pays this share in 14 instalments during a financial year.
The 41% share comes from the 16th Finance Commission, whose recommendations apply for the five years from 1 April 2026 to 31 March 2031.
Article 270 and the Divisible Pool
The divisible pool is the part of the Centre's tax money that must be shared with the states. The Centre collects big taxes like income tax, corporation tax and Central GST. But it does not keep all of this money. Article 270 of the Constitution says these taxes are to be divided between the Centre and the states. The pot of money that gets divided is called the divisible pool, and the states' share of it is called tax devolution.
The ₹1,09,019 crore released to states is part of their 41% share of the divisible pool created by Article 270. Releasing an instalment early does not change the total a state gets in the year; it only gives the money sooner, so states can spend on projects during the busy festive and construction season.
Finance Commission (Article 280)
The Finance Commission is a constitutional body set up by the President of India every five years under Article 280. It recommends how the Centre's shareable taxes should be divided between the Centre and the states (vertical split), and then among the states (horizontal split). It also recommends grants to states and local bodies. Its recommendations are advisory, but the government usually accepts the devolution share.
The amount each state receives in this ₹1.09 lakh crore release is decided by the 16th Finance Commission's formula. The Finance Commission fixes the 41% share and each state's percentage; the Ministry of Finance only decides the timing of the instalments.
- Additional tax devolution released: ₹1,09,019 crore on 31 October 2026
- Second additional instalment of 2026-27; the first (also ₹1,09,019 crore) was released on 1 August 2026
- States' share of the divisible pool: 41% (16th Finance Commission, 2026-31)
- Devolution is normally paid in 14 instalments in a financial year
- 16th Finance Commission chairman: Arvind Panagariya; report tabled 1 February 2026
- Article 270: divisible pool; Article 271: surcharges; Article 279: net proceeds; Article 280: Finance Commission
- 80th Amendment Act, 2000 made all Union List taxes (except cesses and surcharges) shareable