Devolution to states: Cess, surcharge help Centre keep major chunk of taxes

Among a few tweaks to surcharges, Sitharaman announced the Centre would reduce the highest surcharge levied under personal income tax from 37 per cent to 25 per cent under the new tax regime

The Union government is projected to share a little over 30 per cent of Central taxes with states during fiscal year 2023-24 (FY24), against the 15th Finance Commission’s recommendation of 41 per cent.

The 14th Finance Commission had recommended the devolution of 42 per cent of Central taxes to states, but after Jammu and Kashmir was carved out into two Union Territories, the final report of the 15th Finance Commission recommended the transfer of 41 per cent.

The states’ share, however, has never been close to 41 per cent due to cess and surcharge imposed by the Centre. According to