Each State has to constitute a State Finance Commission once in Five Years to review the financial position of the local bodies as per 73rd & 74th Constitutional Amendments and as envisaged in Article 243 I and 243 Y of the Constitution of India and to make its recommendations.

Accordingly, Fifth State Finance Commission constituted w.e.f. 1.12.2014 and its report and recommendations has been submitted to Hon’ble Governor of Tamil Nadu and Hon’ble Chief Minister on 27.12.2016. The Government has accepted the recommendations and issued G.O.No.84, Finance (FC IV) Department dated 31.03.2017.

The award period for the Fifth State Finance Commission is 5 years (from 2017-2018 to 2021-2022) commencing from April 2017 to March 2022. Based on the recommendations of Fifth State Finance Commission, devolution Grant will be released to urban local bodies by the State Government as follows:

  • The Government has decided that the vertical sharing of devolution is 10% of the Net State Own Tax Revenue (SOTR).
  • The Vertical sharing Ratio between Rural and Urban Local Bodies is 56:44.
  • The devolution formula for both the vertical sharing between the tiers and horizontal sharing within the tier for ULBs is given below.
S.No. Criterion Weightage
1 Population as per 2011 Census 65%
2 Area 15%
3 Per Capita consumption expenditure distance 10%
4 Proportion of Slum population 10%
Total 100%

Based on the 5th State Finance Commission recommendations, the quantum of 5th State Finance Commission Grant released to Municipal Corporations and Municipalities for the year 2019-2020 and the provision for sanction of SFC Grant in the budget estimate for the year 2020-2021 are furnished below:-


(Rs. in Crore)

Year Basic Grant Performance Grant Total
2015-2016 560.92 No actual allocation 560.92
2016-2017 776.70 229.24 1005.94
2017-2018 872.13 872.13
2018-2019 1008.90 1008.90
2019-2020 1363.24 1363.24
Total 4581.89 229.24 4811.13

                                                                (Rs. in Crore)

Year Performance Grant
2017-2018 *259.41
2018-2019 *286.29
2019-2020 *374.88
Total 920.58

* Funds not released by GOI