Union budget: share of Central taxes due to Tamil Nadu may be revised upwards

The amount Tamil Nadu receives as share of the Central Taxes is likely to be revised upwards in the full Union budget for 2024-25 to be presented on Tuesday.

Tamil Nadu’s share in Central Taxes is estimated at ₹49,754.95 crore in the interim Union budget for 2024-25.

Also read | Budget 2024 LIVE News, highlights: July 23

Ratings firm ICRA Ltd. estimates that the tax devolution to the states to be raised by ₹20,000 crore in the full Union budget from about ₹12,19,783 crore estimated in the interim budget for 2024-25.

The share in Central Taxes has increased to ₹45,053 crore in Revised Estimates 2023-24, as compared to ₹41,665 crore in budget estimates. The increase in the revised estimates is due to an increase in tax collections estimated by the Union government, Tamil Nadu Finance Minister Thangam Thenarasu said in his budget speech for 2024-25.

Amid higher tax collections, though there has been an increase in the amount of devolution from the Centre, the DMK government has been pointing out that it has been getting a much lower share.

Earlier this year, Mr. Thenarasu pointed out that while Tamil Nadu accounted for 6.124% of the country’s population, its share from the total divisible pool of Central taxes had decreased from 5.305% under the 12th Finance Commission to 4.079% under the 15th Finance Commission.

In the pre-budget meeting last month, he pointed out that the Union government was continuing to divert its revenue collections away from the divisible pool of taxes, by imposition of cesses and surcharges, as a percentage of gross tax revenue had increased from 10.4% in 2011-12 to 20.28% in 2022-23. 

Mr. Thenarasu requested the Union government to merge the cesses and surcharges into the basic rates of taxation, so that the States received their legitimate share in devolution.

Tamil Nadu government has sought a slew of announcements to be made in the Union budget including the funding for the the Chennai Metro Rail Phase-2, proposal for an elevated expressway between Tambaram and Chengalpattu among others. 

It would be interesting to see how much of these figures in the Union budget announcements.

The State may also benefit if there are broader measures related to income tax relief, infrastructure development, support for MSMEs and pro-poor measures.