Tamil Nadu’s Central Tax Share Sees Notable Rise in Union Budget 2025–26

Positive Revenue Growth for Tamil Nadu

Tamil Nadu’s Central Tax Share Sees Notable Rise in Union Budget 2025–26: The Union Budget 2025–26 brought good news for Tamil Nadu, with an increased allocation of Central taxes. According to the revised estimates for 2024–25, the state will now receive ₹52,491.88 crore, an upward revision from the previously projected ₹50,873.76 crore. This improvement points toward a stronger fiscal devolution, empowering Tamil Nadu to enhance its investment in public welfare and development programmes.

Finance Commission Guidelines and Tamil Nadu’s Share

As per the 15th Finance Commission’s recommendations, Tamil Nadu’s share in the divisible pool of Central taxes stands at 4.079%. Applying this formula to the upcoming financial year, the state’s allocation for 2025–26 is expected to grow to ₹58,021.50 crore. This consistent increase reflects Tamil Nadu’s rightful claim to national revenues under the federal structure and highlights a steady rise in fund allocation.

Fiscal Deficit Controls and State-Level Budgeting

The Union government has fixed a fiscal deficit cap of 3% of GSDP for all states, applicable from FY 2023–24. This limit is crucial to ensuring macroeconomic discipline and responsible budgeting at the state level. Tamil Nadu, along with other states, is expected to maintain its finances within this boundary, balancing growth needs with fiscal sustainability.

Incentives for Power Sector Reforms

To promote critical infrastructure reforms, the Centre has allowed states an extra borrowing limit of 0.5% of GSDP for the period between 2021–22 and 2024–25, specifically aimed at power sector transformation. Tamil Nadu, which has been actively working on improving power distribution efficiency and reducing technical and commercial losses, has benefitted from this incentive. This leeway provides room for capital investment without breaching fiscal limits.

Static GK Snapshot: Tamil Nadu and Union Budget 2025