The Fifteenth Finance Commission’s recommendation was tabled in the Parliament on February 1, 2021.
- In total, main report has 117 core recommendations. Vol-III and IV has numerous suggested reforms for the Union ministries and State governments respectively.
- In order to maintain predictability and stability of resources, especially during the pandemic, XVFC has recommended maintaining the vertical devolution at 41 per cent.
- The 14th Finance Commission had raised States’ share to 42% of divisible revenues, but the 15th Finance panel had reduced the share to 41% in its interim report for 2020-21, citing the conversion of Jammu, Kashmir and Ladakh into Union Territories.
- In XVFC’s assessment, gross tax revenues for 5-year period is expected to be 135.2 lakh crore. Out of that, Divisible pool (after deducting cesses and surcharges & cost of collection) is estimated to be 103 lakh crore.
- States’ share at 41 per cent of divisible pool comes to 42.2 lakh crore for 2021-26 period.
- Including total grants of Rs. 10.33 lakh crore (details later) and tax devolution of Rs. 42.2 lakh crore, aggregate transfers to States is estimated to remain at around 50.9 per cent of the divisible pool during 2021-26 period.
- Total XVFC transfers (devolution + grants) constitutes about 34 per cent of estimated Gross Revenue Receipts of the Union leaving adequate fiscal space for the Union to meet its resource requirements and spending obligations on national development priorities.
- Based on principles of need, equity and performance, overall devolution formula is as follows.
| Criteria | Weight (%) |
| Population | 15.0 |
| Area | 15.0 |
| Forest & ecology | 10.0 |
| Income distance | 45.0 |
| Tax & fiscal efforts | 2.5 |
| Demographic performance | 12.5 |
| Total | 100 |
- The total size of the grant to local governments should be Rs. 4,36,361 crore for the period 2021-26.
- Of these total grants, Rs. 8,000 crore is performance-based grants for incubation of new cities and Rs. 450 crore is for shared municipal services. A sum of Rs. 2,36,805 crore is earmarked for rural local bodies, Rs.1,21,055 crore for urban local bodies and Rs. 70,051 crore for health grants through local governments.
- Urban local bodies have been categorised into two groups, based on population, and different norms have been used for flow of grants to each, based on their specific needs and aspirations.
- Basic grants are proposed only for cities/towns having a population of less than a million. For Million-Plus cities, 100 per cent of the grants are performance-linked through the Million-Plus Cities Challenge Fund (MCF).
