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Budget 2026: ₹1.4 Lakh Cr for States, 41% Tax Devolution Retained

Finance Minister Nirmala Sitharaman presented the Union Budget 2026-27, allocating ₹1.4 lakh crore to states as Finance Commission grants. The Centre has accepted the 16th Finance Commission's recommendation to retain the states' share of central taxes at 41%. The grants are designated for rural and urban local bodies as well as disaster management. Additionally, a new Coconut Promotion Scheme was announced to boost production and productivity in major growing states.

Key Points: Budget 2026: ₹1.4 Lakh Cr State Grants, 41% Tax Share

  • ₹1.4 lakh crore allocated to states
  • 41% tax devolution share retained
  • Grants for rural/urban local bodies & disaster management
  • New Coconut Promotion Scheme launched
2 min read

Union Budget 2026: Centre allocates Rs 1.4 lakh Cr for state local bodies, accepts vertical share of devolution at 41%

FM Sitharaman allocates ₹1.4 lakh crore to states, retains 41% tax devolution per 16th Finance Commission, and launches a Coconut Promotion Scheme.

"The Government has accepted the 16th Finance Commission recommendations to retain the vertical share of devolution at 41 per cent. - Nirmala Sitharaman"

New Delhi, February 1

The Centre has allocated Rs 1.4 lakh crores for states for the Financial Year 2026-27 as Finance Commission grants, Union Finance Minister Nirmala Sitharaman said on Sunday.

Presenting the Union Budget 2026-27, FM Sitharaman said the Centre has accepted the 16th Finance Commission's recommendation to retain the vertical share of devolution at 41 per cent.

She said, "The Government has accepted the 16th Finance Commission recommendations to retain the vertical share of devolution at 41 per cent. I have allocated Rs 1.4 lakh crores for states for FY 2026-27 as Finance Commission grants. These include rural and urban local body and disaster management grants."

The 15th Finance Commission recommended a share of states in the central taxes to be 41 per cent, and the 16th Finance Commission has retained the vertical share of devolution.

In December 2025, for grants to rural bodies, the Centre released more than Rs 723 crores to Rajasthan and Jharkhand. This funding was allocated under the 15th Finance Commission to strengthen village-level institutions, according to a Ministry of Panchayati Raj press release.

The government allocated these funds to support local groups in carrying out important work in the areas. In Rajasthan, a total of Rs 303.0419 crores was released as the first part of the money for the financial year 2025-26. This specific amount was meant for 24 district panchayats, 339 block panchayats, and 3,857 gram panchayats.

Nirmala Sitharaman also proposed a Coconut Promotion Scheme aimed at increasing production and improving productivity to boost India's competitiveness in coconut cultivation.

She said the scheme will focus on major coconut-growing states and include measures such as replacing non-productive trees with new, high-yielding saplings.

"To further enhance competitiveness in coconut production, I propose a coconut promotion scheme to increase production and enhance productivity through various interventions, including replacing non-productive trees with new saplings or plants of varieties in major coconut-growing states," Sitharaman said.

FM Sitharaman presented the Union Budget for record ninth time.

- ANI

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Reader Comments

S
Sarah B
As someone working with an NGO in rural MP, the focus on local bodies is welcome. The real test is implementation. The Rajasthan example shows promise, but we need transparency in how each gram panchayat spends this money. Accountability is key.
A
Ananya R
The Coconut Promotion Scheme is interesting! My family has a small holding in Kerala. Replacing old trees with high-yield varieties could really help farmers increase income. Hope the scheme is well-designed and subsidies reach the actual small growers.
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Vikram M
While the allocation sounds big, we must ask if it's enough. With inflation, the real value might be less. Also, why no increase from 41%? States are demanding more for health and education. The Centre should be more generous in tax devolution.
K
Karthik V
Disaster management grants included is a smart move. Given the increasing frequency of floods and cyclones, local bodies need dedicated funds for preparedness and quick response. This is a forward-looking aspect of the budget. 👍
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Priya S
Ninth budget presentation by FM Sitharaman! Consistency in policy is good. Hope the grants empower our local leaders, especially women in panchayats, to work on water, roads, and sanitation. The success lies in last-mile delivery.

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