Centre Releases ₹1.09 Lakh Crore Extra Tax Devolution Instalment to States: How Tax Sharing Works
On 31 October 2026, the Union Ministry of Finance released ₹1,09,019 crore to state governments as an additional instalment of tax devolution (their share of central taxes). This was over and above the regular monthly transfer.
The ministry said the money was released early because of the festive season and to help states speed up capital spending (spending on long-lasting assets like roads, hospitals and schools).
Uttar Pradesh got the largest share, ₹19,208 crore, followed by Bihar (₹10,845 crore), Madhya Pradesh (₹8,010 crore), West Bengal (₹7,866 crore), Maharashtra (₹7,022 crore) and Rajasthan (₹6,460 crore).
This is the second such extra instalment in 2026-27. A release of the same size was made on 1 August 2026.
Normally, 41% of the divisible pool of central taxes goes to the states, paid in 14 instalments a year: one each month for 11 months and three in March. An advance instalment only changes the timing; it is adjusted within the same year's total.
The Union Budget 2026-27 estimated total tax devolution to states at about ₹15.26 lakh crore.
Finance Commission (Article 280)
The Finance Commission is a constitutional body set up by the President every five years under Article 280. It recommends how the Centre's tax money should be shared between the Centre and the states (vertical sharing), and how the states' total share should be divided among the states (horizontal sharing). It also recommends grants for states and local bodies. Its formula decides why one state, such as Uttar Pradesh, gets a much bigger share than another.
The amount each state received in this instalment is not decided case by case. It follows the shares fixed by the 16th Finance Commission for 2026-31, which is why UP, Bihar and Madhya Pradesh top the list.
Article 270 and the Divisible Pool
The divisible pool is the part of the Centre's tax collection that must be shared with the states. Under Article 270, taxes like income tax, corporation tax and Central GST are collected by the Centre but divided between the Centre and the states. Cesses and surcharges, and the cost of collecting taxes, are kept out of the pool, so the Centre keeps them fully.
The ₹1.09 lakh crore is a part of the states' 41% share of the divisible pool, paid earlier than usual. It does not increase the states' total share for the year; it only puts money in their hands sooner.
Revenue Expenditure vs Capital Expenditure
Every rupee a government spends falls into one of two groups. Revenue expenditure pays for running the government day to day, such as salaries, pensions, interest and subsidies. Capital expenditure creates long-lasting assets, such as roads, bridges, buildings and machines, or reduces liabilities, such as repaying loans. Economists see capital spending as better for long-term growth because the assets keep giving benefits for years.
The Finance Ministry said the advance release is meant to let states speed up capital spending. Extra cash in the second half of the year can help states start or finish asset-creating projects instead of holding them back for want of funds.
- Additional tax devolution released: ₹1,09,019 crore on 31 October 2026 (second such release in 2026-27; first on 1 August 2026)
- Top recipients: Uttar Pradesh ₹19,208 crore; Bihar ₹10,845 crore; Madhya Pradesh ₹8,010 crore; West Bengal ₹7,866 crore; Maharashtra ₹7,022 crore; Rajasthan ₹6,460 crore
- States' vertical share: 41% of the divisible pool (16th Finance Commission, 2026-31)
- Devolution schedule: 14 instalments a year (11 monthly + 3 in March)
- Budget estimate of tax devolution, 2026-27: about ₹15.26 lakh crore (revised estimate 2025-26: about ₹13.93 lakh crore)
- 16th Finance Commission chair: Arvind Panagariya; new criterion: contribution to GDP (10%)
- Article 270: sharing of central taxes; Article 271: surcharges kept by the Centre; Article 280: Finance Commission