The government will transfer an estimated Rs 25.44 lakh crore to states in FY27 through tax devolution and other statutory releases, Union Finance Minister Nirmala Sitharaman said in the Lok Sabha on Tuesday.
Rejecting allegations that certain states were denied Budget allocations, Sitharaman said the Centre has adhered to the recommendations of the 16th Finance Commission, including during 2018–19 and the period from 2020 to 2023. She emphasised that transfers to states are being made strictly in line with the constitutional framework.
She added that in its report, the Finance Commission stated that for the years 2018–19 to 2022–23, the amounts required to be transferred from the Central Government to the State Governments were fully released. As a result, it was said that there is no scope for any doubt on this matter for the states.
The Finance Minister said the Union Budget 2026–27 places strong emphasis on sectors such as bio-pharma, animal husbandry, agriculture and fisheries. She added that the Centre is open to working with states to establish mega textile parks as part of its industrial development push.
Sitharaman also highlighted the government’s efforts to broaden access to technology and education, stating that artificial intelligence learning opportunities are no longer limited to a privileged few.
“Total resources to be transferred to the states, including the devolution of states’ share in taxes and releases under centrally sponsored schemes in 2026–27, are estimated at Rs 25.44 lakh crore,” she told the House.
Total expenditure
She said the Budget for 2026–27 proposes total expenditure of ₹53.47 lakh crore, reflecting the government’s continued emphasis on capital investment, welfare spending and fiscal support to states.
Based on recommendations from state finance ministers, Sitharaman said the allocation for 50-year interest-free loans to states under the Special Assistance to States for Capital Investment (SASCI) scheme has been increased to ₹2 lakh crore. While the Centre’s capital expenditure for 2026–27 has been set at ₹12 lakh crore, she noted that when combined with spending by states and Union Territories, the effective capital outlay will rise to ₹17.1 lakh crore, or around 3% of GDP.
Budget 2026 estimates
Outlining the fiscal roadmap, the Finance Minister told the Lok Sabha that gross tax receipts in the Budget Estimates for 2026–27 are projected at Rs 44.04 lakh crore, about 8% higher than the Revised Estimates for 2025–26, representing an increase of Rs 3.26 lakh crore. Total expenditure for the year is estimated at Rs 53.47 lakh crore, while capital expenditure has been pegged at Rs 12.22 lakh crore, accounting for 3.1% of GDP and marking an 11.5% increase over the revised estimates for 2025–26.
Cess and surcharge
“States cannot have it both ways,” FM Sitharaman said in the Lok Sabha, stressing that states should assess whether they are receiving their full share of the net proceeds that form the divisible pool, rather than focusing on gross tax revenue. She clarified that cess and surcharge are excluded from the divisible pool, as mandated by the Constitution, and therefore need to be deducted from gross collections. The Centre, she said, levies cess and surcharge strictly in accordance with constitutional provisions, with cess collected for specific, earmarked purposes.
