- Sitharaman confirmed full 41% tax share transfer to states as per Finance Commission.
- Effective capital expenditure including grants to states totals Rs 17.1 lakh crore
- Total resources to states for 2026-27 estimated at Rs 25.44 lakh crore
Finance Minister Nirmala Sitharaman on Wednesday rejected claims that states have been shortchanged in the Union Budget, asserting that the Centre has transferred the full 41% share of divisible taxes as recommended by the Finance Commission.
Replying to the Budget debate in Parliament, Sitharaman said while the headline capital expenditure stands at Rs 12.2 lakh crore, the effective capital expenditure, including grants to states, totals Rs 17.1 lakh crore, amounting to 4.4% of GDP.
"This Rs 17.1 lakh crore is being spent to build assets across states and Union Territories," she said, stressing that the money is going directly to strengthen infrastructure across the country.
She dismissed allegations that the Centre diluted tax devolution. "We have transferred 41% of the divisible pool to the states. No state's share has been reduced," she said.
For 2026-27, total resources to be transferred to states, including tax devolution and releases under centrally sponsored schemes, are estimated at Rs 25.44 lakh crore. That marks an increase of Rs 2.70 lakh crore over the current year's revised estimate and Rs 3.78 lakh crore more than the 2024-25 actuals.
"Itna paisa states ko jayega," she said, underscoring the scale of the transfer.
On credit flow, Sitharaman said there is no shortage of lending to industry, including small and medium enterprises. "Credit kahin kam nahin," she said. Total credit expanded by 13.8% in the current financial year. As of January 15, 2026, non-food bank credit grew 13%, while NBFC credit rose 15.4%.
Citing the 16th Finance Commission report tabled in Parliament, she said it reviewed transfers from 2018-19 to 2022-23 and concluded that the Centre's devolution matched its recommendations in each year.
Clarifying the tax-sharing formula, Sitharaman said the 41% applies to the divisible pool, the net proceeds of taxes, not gross tax revenue, which includes surcharges. The Constitution permits the Centre to levy surcharges, she noted. "You cannot go both ways," she said.
Addressing criticism over cesses, she said collections earmarked for sectors such as education, health and roads ultimately support states. She pointed members to Annex 4A and 4B of the Budget receipt documents, audited by the CAG, for detailed data on how funds are allocated.
