The Union Cabinet has given its nod to the Terms of Reference (ToR) for the 16th Finance Commission, tasked with recommending the distribution of tax revenues between the Centre and states for the five-year period starting April 1, 2026. The previous recommendations from the 15th Finance Commission remain in effect until March 31, 2026. The chairmanship and members of the 16th commission will be announced at a later date. The ToR broadly focuses on three key areas: devising a formula for the allocation of the Centre’s tax revenues to states, determining the allocation of funds among states, and addressing grants-in-aid to states as well as the resources of panchayats and municipalities.
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