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The 15th Finance Commission recommended 41% vertical devolution of Union tax revenues to States, down from 42% by the 14th Finance Commission, primarily due to the creation of new Union Territories (J&K, Ladakh) affecting the devolution formula.
- True
- False
Answer: True
Vertical devolution trend: (a) 14th Finance Commission (2015-20): Recommended 42% vertical devolution to States (highest ever), reflecting cooperative federalism, (b) 15th Finance Commission (2020-25): Recommended 41% vertical devolution, reduction primarily due to: (i) Creation of new Union Territories: J&K, Ladakh (previously part of State share), (ii) Changed criteria weights: Demographic performance, tax effort added; population weights adjusted, (c) Rationale for 41%: (i) Maintain fiscal space for Union: National security, infrastructure, welfare schemes with national footprint, (ii) Balance with State needs: 41% still substantial devolution enabling State autonomy in expenditure, (d) Applications: (i) State budgets: 41% devolution forms significant revenue source for States, especially those with low own tax capacity, (ii) Fiscal planning: States plan expenditures based on predictable FC devolution, (e) Illustrates fiscal federalism evolution: Technical criteria mediating political claims; FC balances Union fiscal space with State autonomy through calibrated devolution.