Union Budget 2026: 16th Finance Commission recommends 41% tax devolution to States, increased share to South India

The Sixteenth Finance Commission (16th FC) has recommended that the Central Government retain the 41% share of tax devolution to the States that had been implemented since 2021. Finance Minister Nirmala Sitharaman, in her Budget 2026 speech on Sunday (February 1, 2026), announced that the Centre has accepted the 16th FC’s recommendations.

“The Government has accepted the recommendation of the Commission to retain the vertical share of devolution at 41%,” Ms. Sitharaman said. “As recommended by the Commission, I have provided ₹1.4 lakh crore to the States for the FY 2026-27 as Finance Commission Grants. These include Rural and Urban Local Body and Disaster Management Grants.”