UPSC Prelims Practice Questions — Tax devolution for States at 41%; South gets share hike

Q1. With reference to the horizontal devolution formula recommended by the 16th Finance Commission for the period 2026-27 to 2030-31, consider the following criteria and their weights: 1. Income Distance — 42.5% 2. Population (Census 2011) — 17.5% 3. Tax and Fiscal Effort — 2.5% 4. Contribution to GDP — 10% Which of the above is/are correctly identified?

  1. Income Distance — 42.5%
  2. Population (Census 2011) — 17.5%
  3. Tax and Fiscal Effort — 2.5%
  4. Contribution to GDP — 10%
  • A. 1 and 2 only
  • B. 3 and 4 only
  • C. 1, 2 and 4 only
  • D. 1, 2, 3 and 4

Q2. In the context of recommendations of the 16th Finance Commission, the term 'divisible pool' of Union taxes refers to which one of the following?

  • A. The gross tax revenue of the Union Government, including cesses and surcharges
  • B. The net proceeds of Union taxes after deducting cesses, surcharges and cost of collection
  • C. The aggregate of tax and non-tax revenue receipts of the Union Government
  • D. The sum of tax devolution and grants-in-aid transferred to States in a given year

Q3. Among the criteria used by the 16th Finance Commission for horizontal devolution of taxes among States for 2026-31, which one carries the highest weight?

  • A. Population (Census 2011)
  • B. Income Distance
  • C. Demographic Performance
  • D. Contribution to GDP

Q4. The report of the Finance Commission, including the 16th Finance Commission's recommendations on tax devolution, is laid before Parliament and operationally administered through which one of the following?

  • A. NITI Aayog
  • B. Department of Revenue, Ministry of Finance
  • C. Department of Economic Affairs, Ministry of Finance
  • D. Department of Expenditure, Ministry of Finance