**Summary:**
This document summarizes the Ministry of Finance's response to Lok Sabha Unstarred Question No. 4030, posed on August 18, 2025, regarding tax devolution concerns of Karnataka. The query addressed three key areas: (a) fiscal impact assessment on Karnataka's capital expenditure due to a potential drop in devolution, (b) a proposal to shift weightage from income distance to Karnataka's GDP share in the 16th Finance Commission's Terms of Reference, and (c) mechanisms for considering states' contributions to the central pool when determining their share in fund devolution.
The Minister of State in the Ministry of Finance, Shri Pankaj Chaudhary, responded that the total amount of shareable taxes and duties devolved to Karnataka has increased from ₹1.51 lakh crore during the 14th Finance Commission award period (FY 2015-16 to FY 2019-20) to ₹2.08 lakh crore in the 15th Finance Commission award period (FY 2021-22 to BE 2025-26). The allocation of resources between revenue and capital expenditure is the prerogative of the State Government.
Regarding the methodology for distributing net proceeds of taxes among states, the response clarifies that this is determined by the Finance Commission for each award period.
Key Entities Referenced
Ministry of Finance: The Indian government ministry responsible for financial matters.
Department of Economic Affairs: A department within the Ministry of Finance, Government of India.
Lok Sabha: The lower house of the Parliament of India.
Karnataka: A state in India, mentioned in relation to tax devolution concerns.
16th Finance Commission: The upcoming Finance Commission of India, responsible for recommending the distribution of tax revenues between the Union and the States.
SHRI K SUDHAKARAN: A member of parliament who raised a question regarding tax devolution concerns of Karnataka.
SHRI PANKAJ CHAUDHARY: The Minister of State in the Ministry of Finance, who provided the answer to the question.
14th Finance Commission: Finance Commission of India for the award period FY 2015-16 to FY 2019-20.
15th Finance Commission: Finance Commission of India for the award period FY 2021-22 to BE 2025-26.
GOVERNMENT OF INDIA
MINISTRY OF FINANCE
DEPARTMENT OF ECONOMIC AFFAIRS
LOK SABHA
UN-STARRED QUESTION NO. 4030
TO BE ANSWERED ON MONDAY, THE 18th AUGUST, 2025
SRAVANA 27, 1947 (SAKA)
“TAX DEVOLUTION CONCERNS OF KARNATAKA”
4030. SHRI K SUDHAKARAN:
Will the Minister of FINANCE be pleased to state:
(a) whether the Government has conducted any fiscal impact assessment on the Karnataka’s capital
expenditure due to drop in devolution of its share;
(b) whether the Government proposes to shift weightage from income distance to GDP share of
Karnataka in the 16th Finance Commission’s Terms of Reference; and
(c) the mechanisms taken into account for State’s contribution to the Central pool while determining its
share in devolution of funds?
ANSWER
THE MINISTER OF STATE IN THE MINISTRY OF FINANCE
(SHRI PANKAJ CHAUDHARY)
(a) The total amount of shareable taxes and duties devolved to the State of Karnataka has increased
from ₹1.51 lakh crore in the 14th Finance Commission award period (FY 2015-16 to FY 2019-20) to
₹2.08 lakh crore in the 15th Finance Commission award period (FY 2021-22 to BE 2025-26). The inter-
se allocation of resources including share in central taxes between revenue expenditure and capital
expenditure is a decision of the State Government.
(b) & (c): The methodology and criteria for, inter-se, distribution of net proceeds of taxes among the
States is decided by the Finance Commission for its award period.
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