Karnataka seeks pro-growth tax devolution from 16th Fin Commission

New Delhi: Chief Minister Siddaramaiah met Union Finance Minister Nirmala Sitharaman on Tuesday and urged the Centre to support a pro-growth tax devolution framework under the 16th Finance Commission.

Accompanied by senior officials, the chief minister emphasised the development needs of Bengaluru, Kalyana Karnataka, and Malenadu, stating that equitable devolution would boost Karnataka’s growth trajectory.

Referring to the losses under the 15th Finance Commission, Siddaramaiah noted Karnataka’s tax devolution share dropped from 4.713% to 3.647%, a 23% reduction, alongside a denial of Rs 11,495 crore in special grants, totalling a Rs 80,000 crore loss.

After the meeting, the CM told reporters that Karnataka proposed reducing the income-distance weightage by 20 points, reallocating it to fiscal contribution based on the state’s GDP share.

Karnataka also suggested scrapping Revenue Deficit Grants in their current form, arguing they conflict with FRBM fiscal discipline principles, and redistributing 1.92% of Gross Union Receipts among states via the horizontal devolution formula.

Siddaramaiah urged Sitharaman to include these proposals in the Union government’s memorandum to the 16th Finance Commission, emphasising that growth-friendly devolution would strengthen states’ contributions to India’s development, according to a statement from the Chief Minister’s Office.

Chaired by Arvind Panagariya, the 16th Finance Commission, constituted in December 2023, will

submit recommendations by October 31, 2025, effective from April 1, 2026, for five years.