Uttar Pradesh

• 12 Jun 2024

Additional Installment of the Tax Devolution

Why in News?

Uttar Pradesh received the largest portion of Rs 25,495 crore, which was the highest amount in the country, as an extra payment for tax devolution from the Union finance ministry under the new government.

• According to the finance ministry, the funds will allow room for the states to expedite development projects.

Key Points

• This amount has come as an additional installment of devolution of taxes to states besides the devolution amount for the month of June 2024.
• Uttar Pradesh topped the list with maximum allocation, followed by Bihar (Rs 14,056.12 crore), Madhya Pradesh (Rs 10,970.44 crore), and West Bengal (Rs 10,513.46 crore) in tax devolution.

Tax Devolution

• Tax devolution refers to the distribution of tax revenues between the central government and the state governments. It is a constitutional mechanism established to allocate the proceeds of certain taxes among the Union and the states in a fair and equitable manner.
• Article 280(3)(a) of the Constitution of India mandates that the Finance Commission (FC) has the responsibility to make recommendations regarding the division of the net proceeds of taxes between the Union and the states.