President Extends Tenure of 16th Finance Commission by One Month [Read Notification]
The 16th Finance Commission is to submit a fiscal framework that will structure the tax devolution policy for 2026-2031.
Finance - commission - taxscan
Finance - commission - taxscan
The President of India has approved a one-month extension of the tenure of the 16th Finance Commission, effectively permitting the commission to submit its final report by November 30, 2025.
The extension was formally announced through a Gazette Notification dated October 10, 2025, amending the original notification from December 31, 2023 order which provided for the constitution of the Commission under Article 280 of the Constitution of India.
The Finance Commission plays a pivotal role in maintaining fiscal federalism by recommending the vertical and horizontal devolution of taxes and grants every five years.
By the latest amendment via Notification No. S.O. 4640(E), the Ministry of Finance replaces the earlier deadline of October 31, 2025 with November 30, 2025 as the new deadline to finalise the report on the distribution of tax revenues between the Union and the States for the five-year period commencing April 1, 2026.
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The 16th Finance Commission
Chaired by Dr. Arvind Panagariya, the 16th Finance Commission is tasked with recommending principles for effective tax devolution, grants-in-aid to States and to devise measures to augment the Consolidated Funds of States to support local governance and disaster management. The Commission is also tasked with examining mechanisms to strengthen fiscal discipline and promote equitable growth among the centre and states.
The 16th Finance Commission currently comprises Annie George Mathew and Manoj Panda as full-time members, part-time members Soumya Kanti Ghosh and T. Rabi Sankar - Deputy Governor of RBI, who replaced former Member Ajay Narayan Jha, with Ritvik Ranjan Pandey serving as Secretary.
The Commission has conducted extensive consultations with State governments and Union Ministries over the past several months. Various states have urged the Commission to raise their share in the divisible pool of central taxes from 41% to 50%.
The Andhra Pradesh government requested that the weightage of the “income distance” criterion be reduced from 45% to 30% to encourage fiscal efficiency, while Uttar Pradesh sought ₹5.19 lakh crore in assistance for eleven priority sectors, including ₹2.1 lakh crore for Panchayati Raj institutions and ₹1.29 lakh crore for urban development.
With the extension, the Commission now has until November 30, 2025 to submit recommendations that will shape the Union-State fiscal framework for the period from 2026 till 2031.
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