XV Finance Commission Grants: Tied & Untied Funds for Rural Local Bodies

The Union Government has released XV Finance Commission (XV-FC) tied grants during the financial year 2025–26 to Rural Local Bodies in Chhattisgarh, Gujarat, Madhya Pradesh, Punjab and Sikkim.

• It has also released withheld portions of both tied and untied grants to Himachal Pradesh, Odisha, Sikkim and Tripura.

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About XV Finance Commission (XV-FC) Grants

• Rural Local Bodies (RLBs) receive financial devolution from the Central Finance Commission in the form of tied (60%) and untied grants (40%).
• Aim: Strengthen decentralized governance, improve service delivery, and enhance rural infrastructure.
• Institutional Framework: The Government of India through the Ministry of Panchayati Raj and Ministry of Jal Shakti (Department of Drinking Water and Sanitation) recommends release of XV-FC grants to States for Rural Local Bodies which is then released by the Ministry of Finance.
• Tenure: Funds are released in two installments annually.
• Utilisation of Grants:
  • Untied Grants: The Untied grants will be utilized by Panchayati Raj Institutions/ Rural Local Bodies for location-specific felt needs, under the Twenty-Nine subjects enshrined in the Eleventh Schedule of the Constitution, except for salaries and other establishment costs. 
  •  Tied Grants: The tied grants can be used for the basic services of:
    • sanitation and maintenance of ODF status, and this should include management and treatment of household waste, and human excreta and fecal sludge management in particular supply of drinking water, rainwater harvesting and water recycling.

About Tied and Untied Grants

• Tied Grants: Grants provided for specific purposes/sectors, and must be utilized only for the designated activities as per government guidelines.
• Untied Grants: Grants provided with no specific spending restriction, allowing local bodies to use them based on local priorities and needs (except for certain exclusions like salaries).

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