16th Finance Commission Maintains Tax Devolution and Ends Revenue-Deficit Grants

The 16th Finance Commission's recommendations, released with the 2026-27 Union Budget, maintain the current 41% vertical tax devolution to states and exclude cesses and surcharges from the divisible pool. It also rejects increasing states' shares by abolishing centrally sponsored schemes. The Commission emphasizes efficiency by weighting horizontal distribution based on GSDP and ends revenue-deficit grants to encourage states to enhance their fiscal capacity and economic efforts.