The Indian government is expected to set up the 16th Finance Commission soon to propose suggestions on Centre-state financial relations, including how tax should be divided between them for the next five years starting from April 1, 2026. A constitutional body, the finance commission gives suggestions on Centre-state financial relations. The Terms of Reference (ToR) and the commission's members are currently being worked out by the government. The previous commission had proposed setting the tax devolution ratio at 42 per cent, which was accepted, and the current commission's mandate will include fiscal deficit, debt path, and additional borrowing capacity for states.
