Are States Getting Their Due Share of Income Tax Proceeds

Income Tax Proceeds?
Hemlata Rao This paper attempts to examine the concept of 'net proceeds' of income tax with a view to ascertaining whether the states are in practice getting the share of the divisible pool as per the recommendations of the various Finance Commissions. It also discusses the scope for inclusion of a number of items which are at present excluded from the 'net proceeds' of income tax. Finally, it is suggested that since a major portion of the proceeds of income tax goes to the states and this constitutes an important part of the states' finances, it would be setting a healthy trend if the states are consulted by the Centre before it introduces major changes in income tax policy.