Centre-State financial relations define how India distributes taxation powers, revenues, grants, and borrowing responsibilities between Union and State governments to maintain fiscal balance and cooperative federalism.

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• Constitution of India under Part XII (Articles 268–293) defines detailed financial relations between Centre and States ensuring structured division of revenue and expenditure responsibilities.
• Taxation powers are divided through Union List and State List, while Parliament holds residuary taxing powers for any unlisted subjects under constitutional provisions.
• Goods and Services Tax introduced concurrent taxation authority for both Centre and States, creating a unified indirect tax system under cooperative federalism framework.
• Finance Commission recommends distribution of central taxes, ensuring states receive a share from divisible pool for balanced regional development and fiscal equity.
• Statutory grants under Article 275 are provided to financially weaker states based on Finance Commission recommendations for development and fiscal support.
• Discretionary grants under Article 282 allow Centre and States to fund public welfare schemes even beyond their legislative competence areas.
• States can borrow within India subject to constitutional limits and Centre’s approval when indebted, ensuring macroeconomic fiscal discipline.
• Emergency provisions allow Centre to modify financial distribution during crises, temporarily altering tax sharing and grants to maintain national stability.