---
title: "Vertical Devolution of Taxes: Definition | Model Diplomat"
description: "Vertical devolution of taxes refers to the share of India's divisible tax pool allocated to states, set by the Finance Commission, currently at 41%."
url: "https://modeldiplomat.com/learn/glossary/vertical-devolution-of-taxes"
---

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Model Diplomat Research Team · Last reviewed June 22, 2026

TL;DR

- Vertical devolution of taxes is the share of the Union government's net divisible tax pool transferred to states collectively, fixed by India's Finance Commission for a five-year period.
- What is the current vertical devolution percentage in India?
- How does vertical devolution differ from horizontal devolution?
- Why do cesses and surcharges reduce the effective value of devolution?
- Is the Finance Commission's vertical devolution recommendation binding on the Union?

[Civil Service & Diplomatic Exams](https://modeldiplomat.com/learn/civil-services/glossary)Updated June 22, 2026

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The Fifteenth Finance Commission, chaired by N. K. Singh, recommended in 2021 that 41 percent of the divisible pool be devolved vertically to the states for the period 2021–22 to 2025–26.

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