Which of the following statements with regard to recommendations of the 15th Finance Commission of India are correct?

I. It has recommended grants of ₹ 4,800 crores from the year 2022-23 to the year 2025-26 for incentivizing States to enhance educational outcomes.

II. 45% of the net proceeds of Union taxes are to be shared with States.

III. ₹ 45,000 crores are to be kept as performance-based incentive for all States for carrying out agricultural reforms.

IV. It reintroduced tax effort criteria to reward fiscal performance.

Select the correct answer using the code given below.

The correct answer is I, III and IV.

Let us analyze each statement step-by-step to understand why they are correct or incorrect under the recommendations of the 15th Finance Commission of India (which covered the period from 2021-22 to 2025-26):

Statement I: Correct
The 15th Finance Commission recommended a set of performance-linked grants to encourage states to improve social sector outcomes. Specifically, it recommended a performance-based incentive of ₹ 4,800 crore (₹ 1,200 crore annually) for the period from 2022-23 to 2025-26 to incentivize states to enhance educational outcomes.

Statement II: Incorrect
The Commission recommended that the share of states in the net proceeds of Union taxes (vertical devolution) should be 41%. This was a reduction from the 42% recommended by the 14th Finance Commission, which was adjusted by 1% to account for the newly formed Union Territories of Jammu & Kashmir and Ladakh. Therefore, the statement claiming 45% is shared is incorrect.

Statement III: Correct
The Commission recommended performance-based incentives for states carrying out agricultural reforms, setting aside an allocation of ₹ 45,000 crores for this purpose to encourage states to implement reforms in the agricultural sector.

Statement IV: Correct
To reward fiscal performance and encourage states to maintain fiscal discipline, the 15th Finance Commission reintroduced "tax effort" (with a weight of 2.5%) as a criterion in its horizontal devolution formula, which determines how the pool of taxes is distributed among different states.

Since statements I, III, and IV are correct, the correct combination is I, III and IV.