The 73rd Amendment, in force since April 1993, made village, block and district panchayats a constitutional tier of government. It gave them elections, reserved seats and a list of 29 subjects in the Eleventh Schedule that states could hand over. It did not give them money of their own. That was left to state laws, to State Finance Commissions and to whatever the Union Finance Commission chose to send. Thirty-three years later, two documents show how that has worked out: the Reserve Bank of India’s study of panchayat finances, published in January 2024, and the report of Parliament’s Standing Committee on Rural Development and Panchayati Raj, presented on 5 August 2026.

The short answer: India’s roughly 2.5 lakh village panchayats raise about two rupees in every hundred they receive from taxes of their own, and about six rupees counting fees and interest. The rest comes from the Centre and the states. A much larger Finance Commission award for 2026-31 now rewards panchayats that raise more. It is still too early to tell whether that changes the habit.

Ninety-four rupees in every hundred are grants

The RBI study uses accounts that panchayats file on eGramSwaraj, the Ministry of Panchayati Raj’s accounting portal, for 2020-21 to 2022-23. In 2022-23 the 2.41 lakh village panchayats that reported receipts took in Rs 35,354 crore. Rs 737 crore of that, 2.1%, was their own tax revenue, mostly property tax on houses and buildings. Another Rs 1,494 crore (4.2%) was non-tax income such as interest, fees and market dues. Central grants were Rs 24,699 crore (69.9%) and state grants Rs 8,148 crore (23.0%).

The RBI’s own ratio table, which it computes from per-panchayat averages rather than totals, gives an even lower figure: own taxes 1.0% of revenue, central grants 79.8% and state grants 15.4%. On that basis the average panchayat collected about Rs 21,000 in taxes in 2022-23 out of Rs 21.2 lakh of revenue. Either way, the figure is one or two rupees in a hundred.

The totals were also shrinking. Panchayat revenue fell from 0.21% of GDP in 2020-21 to 0.13% in 2022-23, and spending from 0.13% to 0.08%. Average spending per panchayat fell from Rs 17.3 lakh to Rs 12.5 lakh; the RBI attributes part of the fall to unusually high spending in the pandemic year. Of the Rs 20,712 crore spent in 2022-23, 63% went on general Panchayati Raj programmes and 27% on water supply and sanitation, which the Finance Commission’s tied grants pay for. Parliament’s standing committee has warned that funding to panchayats has been eroded across successive Union Budgets.

The states that devolve most report no own taxes

How much a panchayat can do depends on its state. The Ministry’s Devolution Index for 2024, prepared by the Indian Institute of Public Administration (IIPA) from data up to 2021-22, scores states on six dimensions: framework, functions, finances, functionaries (staff), capacity building and accountability. The national average rose from 39.9 to 43.89 out of 100 between 2013-14 and 2021-22. The weakest dimension is functions, the actual transfer of the 29 subjects, where the national average is 29.18. For finances it is 37.04. Karnataka leads at 72.23, followed by Kerala (70.59) and Tamil Nadu (68.38). Punjab, 17th among the general-category states, scores under 30.

Index rank: position among general-category states on the Devolution Index 2024 (MoPR/IIPA); scores run from 72.2 for Karnataka to 50.0 for Odisha in this list. Own tax: rupees per village panchayat in 2022-23, from the RBI study’s state appendix; n.r. means eGramSwaraj had no data, not that panchayats collected nothing. FC paid: share of the state’s 2025-26 Finance Commission grant released by 17 March 2026 (PIB).

The table shows a data problem as much as a finance problem. Karnataka, the top-ranked state, and Kerala, second, show no own tax revenue at all in the RBI’s appendix. Neither do Uttar Pradesh, Gujarat, West Bengal or Madhya Pradesh. Kerala’s panchayats do levy property tax, so the gap almost certainly reflects what reaches eGramSwaraj rather than what is collected. Where the figures are reported, they vary widely. In Maharashtra, own taxes and non-tax income together were 26% of the average panchayat’s revenue; in Tamil Nadu own taxes were 3.8%; in Odisha they were Rs 25 per panchayat for the whole year.

State Finance Commissions, which the Constitution requires every five years to decide what share of state revenue goes to local bodies, explain much of the rest. Per-capita grants on their recommendations averaged Rs 6,090 a year in Karnataka and Rs 3,000 in Kerala over 2015-19, against Rs 450 in Uttar Pradesh, Rs 357 in Bihar and Rs 147 in Odisha, where they fell by 30%. Ministry data cited in the committee’s work, as reported by The Tribune, showed only 25 states had constituted State Finance Commissions and only nine had reached the sixth one; some had not constituted the third, fourth or fifth.

The Finance Commission money arrives late, and is about to double

The 15th Finance Commission recommended Rs 236,805 crore for rural local bodies for 2021-26, plus Rs 60,750 crore for 2020-21. By 17 March 2026, Rs 267,251 crore of the Rs 297,555 crore had been released, 90%. In the final year, 2025-26, only Rs 26,656 crore of Rs 48,573 crore (55%) had gone out two weeks before the year ended. Grants are released in instalments only after a state certifies it passed the previous one on to panchayats within 10 working days and meets conditions on audited accounts and its State Finance Commission. Karnataka and Telangana had received nothing for 2025-26 by mid-March; Arunachal Pradesh had received nothing since 2022-23. A later report put the release rate for the whole award at about 95%, which this piece could not reconcile with the March table.

The 16th Finance Commission, covering 2026-31, has recommended Rs 435,236 crore for rural local bodies, about 84% a year more than its predecessor. Rs 348,188 crore (80%) is a basic grant, half of it tied to sanitation and water. The remaining Rs 87,048 crore is for performance. Half of that, Rs 43,524 crore, is a local body performance grant released according to how much own-source revenue panchayats raise and increase; the other half rewards states for passing on their own funds.

The performance grant is large next to the base it is meant to grow. Spread over five years it is about Rs 8,705 crore a year, roughly 12 times the Rs 737 crore of own taxes that reporting panchayats collected in 2022-23. That is a strong incentive, and also a reason to watch how own revenue is measured: a grant tied to reported collections rewards reporting as much as collecting, and the RBI data show how incomplete reporting still is.

What Parliament’s committee found

The committee’s 35th report, on the effectiveness of the 73rd Amendment and coordination across the three tiers, makes 17 recommendations. It found that elections and representation have largely worked: women hold nearly half of elected panchayat seats, and 21 states and two union territories reserve 50% for them, though it called proxy representation by male relatives widespread. On functions, funds and functionaries it found devolution uneven, with panchayats often acting as implementing agencies for state departments rather than as governments. One panchayat secretary often serves four or five panchayats; the committee wants a dedicated cadre and, in phases, one secretary per gram panchayat. It found block and district panchayats weak, asked states to follow the 80:10:10 sharing of grants between village, block and district tiers, and noted that the generation of audit reports declined in 2024-25. On money, it asked for a strategy to raise own-source revenue, timely State Finance Commissions and performance incentives.

What would fix this

• The Ministry of Panchayati Raj should publish own-source revenue by state every year from eGramSwaraj, and mark each state’s reporting coverage, so that a state showing no own tax is visibly a reporting gap and not mistaken for a panchayat that collects nothing. States that keep accounts in their own systems should push the totals to eGramSwaraj before any performance grant is calculated.
• States should set a minimum property-tax rate for rural buildings, revised with inflation, as the 15th Finance Commission required of states for urban property tax. Panchayats would keep the right to charge more.
• The Ministry should publish, each quarter, the date each state received and passed on every Finance Commission instalment, so delays like the 2025-26 shortfall can be traced to a state or to the Centre.
• A state that has not constituted its State Finance Commission on time, or tabled the action-taken report, should see its share of the 16th Finance Commission’s state performance grant reduced, as the 15th Commission already did for basic grants.
• The cost of one secretary per gram panchayat should be costed and phased into the state performance grant, since staff, not schemes, is where most panchayats are thinnest.

These are proposals from this blog, not recommendations any agency has adopted.

What this piece could not establish

The RBI study is the only national series on panchayat finances, and it ends in 2022-23; no later year was found. Its two measures of the own-tax share differ, 2.1% from totals and 1.0% from per-panchayat averages, because coverage varies by state. The state appendix also does not always add up: the all-states table lists component grants larger than total grants, so this piece uses the RBI’s summary tables for national figures. Several large states report no own tax revenue in eGramSwaraj, and how much Karnataka’s and Kerala’s panchayats actually collect was not found. The Devolution Index uses data to 2021-22. The count of State Finance Commissions comes from a newspaper report of committee material, and its date could not be pinned down. The 15th Finance Commission release figures are as of 17 March 2026, and the later 95% figure appears only in a study-guide summary. The exact formula linking the 16th Commission’s local body performance grant to own-source revenue was not found. The committee’s full report was read only through the PRS summary and press coverage. How many panchayats are currently run by administrators because elections are overdue was not established.

Sources and caveats

About this article: Researched, written and edited by Umashankar Triplicane Dwarakanathan, with AI research assistance; every figure is meant to trace to the primary source cited. See the Editorial Policy for how sourcing, AI use and corrections work.