'Rs 25.44 lakh crore will be transferred to states in 2026–27 as part of devolution of taxes': FM Sitharaman tells Lok Sabha

Nirmala Sitharaman in Lok Sabha

• Rs 25.44 lakh crore to be transferred to states in 2026–27: Finance Minister
• Centre followed Finance Commission's tax devolution recommendations
• Budget emphasizes asset creation, medical hubs, MSME support, and skill development.

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Union Finance Minister Nirmala Sitharaman on Wednesday told the Lok Sabha that a total of Rs 25.44 lakh crore will be transferred to states in 2026–27, including their share of taxes and allocations under centrally sponsored schemes. She asserted that the Centre has adhered to the Finance Commission’s recommendation on tax devolution.

Addressing the House during her reply to the Budget discussion, the minister said, “Total resources to be transferred to the states, including the devolution of states’ share in taxes and releases that are made under the centrally sponsored scheme in 26–27, the coming year, is estimated to be at Rs 25.44 lakh crores. This much money will go to the states this year, next year. This entails an increase of 2.70 lakh crores…”

Responding to criticism that the mandated share was not being fully passed on, Sitharaman stated, “41% it is that we have transferred to the states. We have not reduced any state’s transfer of devolvable tax which has to go.” She underlined that the recommendations of the Finance Commission have been followed in letter and spirit.

Citing findings of the 16th Finance Commission, she said the constitutional body had examined transfers from 2018–19 to 2022–23 and concluded that the Centre’s devolution matched its recommendations each year. “The Finance Commission itself, after studying this in detail, has stated in its report that the money which has to go from the Centre to the states… has been given. There is no scope for any doubt in this for the states,” she said, rejecting allegations that certain states were denied funds.

On the broader fiscal picture, Sitharaman informed the House that “Gross tax receipts in this BE are estimated at Rs 44.04 lakh crore. This is about 8% higher than the RE for 2025–26, an increase of Rs 3.26 lakh crore over the RE.” She pointed out that overall spending for 2026–27 has been projected at Rs 53.47 lakh crore, exceeding the estimated tax collections.

Highlighting the government’s focus on asset creation, she added that capital expenditure is pegged at Rs 12.22 lakh crore, amounting to 3.1% of GDP and registering an 11.5% rise over the Revised Estimates for 2025–26.

The Finance Minister also outlined sectoral priorities, noting that bio-pharma has received significant attention in the Budget. She said five regional medical hubs would be established to strengthen medical tourism. Referring to industry support measures, she told members that the definition of MSMEs had earlier been widened to prevent firms from losing benefits after crossing turnover limits, and that fresh initiatives would assist medium-sized companies with export potential.

Sitharaman further said the government intends to integrate skilling with education and develop mega entrepreneurship hubs near industrial clusters, adding that the Centre is ready to partner with states in nurturing job creators.