Cabinet approves terms of reference for 16th Finance Commission

Govt approves ToR for 16th Finance Commission to make recommendations on sharing of tax revenues between Centre and states. Commission to submit report by Oct 2025. 15th Finance Commission's recommendations valid till FY 2025-26.

The government has approved the 'Terms of Reference' for the 16 Finance Commission, which makes recommendations on sharing of tax revenues between the Centre and states.

The recommendations would cover a five-year period commencing April 1, 2026, Information and Broadcasting Minister Anurag Thakur said on Wednesday, giving details about the decisions taken at the Cabinet meeting last evening.

The commission would submit its report by October 31, 2025, Mr. Thakur said.

The 15th Finance Commission was constituted on November 27, 2017. It made recommendations covering a six-year period commencing April 1, 2020 through its interim and final reports.

The recommendations of the 15th Finance Commission are valid up to financial year 2025-26.

Article 280(1) of the Constitution lays down the modalities for setting up of a Finance Commission to make recommendations on the distribution of net proceeds of taxes between the Union and states; allocation between states of respective shares of such proceeds; grants-in-aid and the revenues of states and measures needed to supplement the resources of 'panchayats' during the award period.

The distribution between the Union and states of the net proceeds of taxes which are to be, or may be, divided between them under Chapter I, Part XII of the Constitution and the allocation between states of the respective shares of such proceeds, are among the terms of reference (ToR) approved by the Cabinet.