16th Finance Commission Report: Karnataka Gains Most, MP Faces Major Loss in Tax Devolution

• The 16th Finance Commission's horizontal devolution formula significantly benefits Karnataka, increasing its share in central tax devolution to 4.13% (up from 3.65%) for 2026-31.
• Karnataka will receive an additional 7,387 crore rupees, totaling 63,050 crore rupees, primarily due to a 10% weightage given to "contribution to GDP" in the new formula.
• Kerala, Gujarat, and Haryana are also major beneficiaries, while Madhya Pradesh faces the biggest loss, with its allocation decreasing by 7,677 crore rupees.
• Populous states like Uttar Pradesh, West Bengal, and Bihar also see reduced allocations under the new formula.
• Finance Minister Nirmala Sitharaman presented the report, which maintains states' share in central taxes at 41% for 2026-31, emphasizing economic efficiency alongside equity.

Why It Matters: The 16th Finance Commission's report shifts tax devolution to reward economic efficiency, benefiting high-GDP states like Karnataka.