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Tamilnadu and Union Budget 2026
February 5 , 2026
17 hrs 0 min
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- Tamil Nadu will receive 4.097% of the net proceeds of shareable Central taxes, as per the recommendations of the 16th Finance Commission.
- It will take effect on April 1, 2026.
- This is slightly higher when compared to the 4.079% of the net proceeds of shareable Central taxes recommended by the 15th Finance Commission.
- Thus, it is accounting for a rate of increase of 0.44%.
- Tamil Nadu is expected to receive ₹62,530.65 crore as net proceeds of sharable Central taxes as per the Budget Estimate for 2026-27.
- It is higher than the Revised Estimate for 2025-26 of ₹56,819.23 crore.
- Tamilnadu was followed by Telangana with a rise of 3.43% and Andhra Pradesh with 4.2%.
- Only Karnataka and Kerala have witnessed a double-digit rate of increase — 13.27% and 23.74%.
- At the all-India level, Kerala’s degree of rise is only next to Haryana’s 24.52%, while the third slot goes to Karnataka.
- The weights assigned to the criteria of area, demographic performance and per-capita GSDP (Gross State Domestic Product) have reduced affecting States like T.N and Kerala.
- Only the criterion of population has seen an increase in weight from 15% to 17.5%.
- However, it does not benefit the southern States including Tamil Nadu and Kerala.
- The rise in the vertical devolution for the south seems to have been achieved by decreasing the share of six northern States such as Uttar Pradesh, Madhya Pradesh and Bihar, besides West Bengal.
- The combined share of the seven States, which stood at 51.20%, has been brought down to 49.93%.
- The 16th FC has dealt elaborately with the subject of subsidies, an area where the south has been a trendsetter.
- At ₹78,453 crore, Tamil Nadu had the highest absolute level of subsidy in 2023 24.
- It is followed by Karnataka, Andhra Pradesh and Telangana at ₹70,149 crore, ₹63,951 crore and ₹62,847 crore respectively.
- The FC is pointing out that the absolute subsidy levels are “somewhat misleading” given the State’s size.
- The Commission names Telangana as one of the States wherein subsidy levels, as a proportion of respective GSDP, exceeded 5% during 2024-26, and Andhra Pradesh having the subsidy level standing between 3% and 5%.
- Even though the southern States had taken a similar stand on many issues, they differed among themselves over revenue deficit grants, meant for bridging the revenue gap.
- While Karnataka expressed scepticism, Andhra Pradesh, Kerala and Tamil Nadu wanted the continuation of these grants.
- However, the 16th FC’s recommendation was against the grants.
- The Union government maintained the status quo with respect to the vertical share of devolution to State from the divisible pool at 41%.
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