The 15th Finance Commission has decided to set up an expert group consisting of representatives from various ministries to work out the modalities on the demand of Defence Ministry for non-lapsable funds for the acquisition and levying of ''defence cess'' to finance security expenditure.
The Finance Commission's report was tabled in Parliament on Saturday, at the same time as Finance Minister Nirmala Sitharaman presented the Union Budget, which increased the defence budget allocation to Rs 4.71 lakh crore from the earlier Rs 4.3 lakh crore.
For modernisation and buying new weapon systems, defence forces have been allocated Rs 1,10,734 crore which is Rs 10,340 more than what was provided in last year''s budget.
The biggest hike in allocation for defence forces came in the defence pension as the budget for pensions went up to Rs 1.33 lakh crore from last year's Rs 1.17 lakh crore allocated last year.
The hike in defence pension budget is more than the hike given in revenue and capital funds for defence.