Telangana proposes new tax devolution formula for equity

Telangana is pushing for a new system of tax devolution to ensure fairer resource distribution among states. The state government has proposed that the 16th Finance Commission assign 50% weight to Gross State Domestic Product (GSDP) in its calculations. This shift would give more resources to states like Telangana that contribute significantly to national growth. During the recent state budget presentation, Finance Minister Bhatti Vikramarka emphasized the need to change the current system. Currently, resources are allocated based on "per capita income distance," which means states with lower income receive a larger share of taxes. Telangana wants to increase the central tax share from 41% to 50%. The government has submitted a detailed report to the Finance Commission. In it, they request better financial assistance for managing debt, infrastructure development, and social welfare programs. The state also pointed out that recent central government cesses have reduced the overall funds available to them. Bhatti expressed concern over the decreasing tax devolution share for southern states. Telangana’s share dropped from 2.437% under the 14th Finance Commission to 2.102% under the 15th. The minister argued that it is unfair to allocate less to well-performing states and called for a more equitable tax distribution system.