New Delhi: Seven Indian States have contributed a larger share to the Centre’s total tax collections than what they received back through devolution, according to Finance Ministry data shared in the Rajya Sabha. According to reports, the analysis covers the period between 2020-21 and 2024-25.
Maharashtra showed the largest negative gap, contributing 36.1 per cent of the Centre’s total tax revenue but receiving only 6.65 per cent of devolved funds. Other States with negative differences included Karnataka (8.8 percentage points), Haryana (4.3 pps), Gujarat (3.5 pps), Tamil Nadu (2.95 pps), Telangana (1.4 pps) and Goa (0.04 pps).
In contrast, Uttar Pradesh benefited the most from the current formula. While it contributed 4.6 per cent of the country’s tax collections, it received 15.8 per cent of total devolved taxes. Bihar, Madhya Pradesh and Rajasthan also recorded positive gaps, receiving more than their contribution by 8 pps, 5.5 pps and 3.55 pps, respectively.
The Centre clarified that devolution follows the Fifteenth Finance Commission’s formula, which does not consider States’ tax contributions. It is based instead on population, area, income, distance, demographic performance, forest & ecology and fiscal efforts. A new formula recommended by the Sixteenth Finance Commission will take effect from 1 April 2026.
