Cabinet clears terms of reference for 16th Finance Commission  

November 29, 2023 04:43 pm | Updated November 30, 2023 09:53 am IST - Hyderabad

Union Minister Anurag Thakur briefing the media on Cabinet Decisions at National Media Centre in New Delhi on Wednesday. November 29, 2023.

Union Minister Anurag Thakur briefing the media on Cabinet Decisions at National Media Centre in New Delhi on Wednesday. November 29, 2023. | Photo Credit: SHIV KUMAR PUSHPAKAR

The Finance Commission’s recommendations would cover a five-year period commencing April 1, 2026; Union Cabinet approves terms of reference for panel including recommending formula for sharing revenues between Centre and States

The Union Cabinet on Wednesday approved the terms of reference (ToR) for the Sixteenth Finance Commission, which will recommend the formula for sharing revenues between the Centre and the States for the five-year period beginning on April 1, 2026.

The government has set a deadline of October 31, 2025, for the panel to submit its recommendations, the government said in a statement.

Apart from the key recommendation on distribution of net proceeds of taxes between the Centre and States and allocation among States of the respective share of such proceeds, the panel will also prescribe measures needed to augment the Consolidated Fund of a State to supplement resources of the panchayats and local bodies on the basis of recommendations made by the respective State Finance Commissions.

Under the ToR, the panel will recommend principles that should govern the grants-in-aid of the revenues of the States out of the Consolidated Fund of India and the sums to be paid to the States by way of grants-in-aid of their revenues. Also, it may review the existing arrangements on financing Disaster Management initiatives and make appropriate recommendations.

The government had established an Advance Cell in the Finance Ministry on November 21, 2022, to oversee the preliminary work pending formal constitution of the panel.

Subsequently, a Working Group headed by Finance Secretary and Secretary (Expenditure) and comprising several senior officials was set up to assist in the formulation of the ToRs. As part of the consultative process, views and suggestions were sought from the State governments and Union Territories (with legislature) on the ToRs and duly deliberated by the group, the government said.

0 / 0
Sign in to unlock member-only benefits!
  • Access 10 free stories every month
  • Save stories to read later
  • Access to comment on every story
  • Sign-up/manage your newsletter subscriptions with a single click
  • Get notified by email for early access to discounts & offers on our products
Sign in


Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.

We have migrated to a new commenting platform. If you are already a registered user of The Hindu and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.