Centre Releases Rs 1.73 Trillion Tax Devolution to States in January 2025

The Centre has released Rs 1.73 trillion in tax devolution to state governments for January 2025, a significant increase from the Rs 89,086 crore devolution in December 2024. This higher allocation aims to help states accelerate capital spending and fund development and welfare initiatives, the finance ministry stated.

Uttar Pradesh, Bihar, Madhya Pradesh, and West Bengal received the highest share of the tax devolution.

The budget estimates for the financial year 2025 (FY25) set the states' share at Rs 12.2 trillion, marking a 10.4% increase over the amount devolved in the revised estimates for FY24.

Under normal procedures, the divisible tax pool is devolved to states in 14 annual instalments—11 monthly and three in March. The 15th Finance Commission recommended a 41% share to states after Jammu and Kashmir was reorganized into two union territories. In comparison, the 14th Finance Commission had suggested a 42% share of central taxes for states.

However, the actual share may be lower due to cess and surcharges imposed by the central government, which are not shared with states.

Data from the Controller General of Accounts indicates a positive trend in devolution to states, with a 5% annual growth from April to November 2025.

Additionally, the finance ministry is expected to ease norms for the release of interest-free capital expenditure loans to states, aiming to boost capex utilization for FY25.

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