Arrange the following norms of tax revenue devolution formula of the Fifteenth Finance Commission in order of their weightages starting from the highest.
(A) Income distance
(B) Area
(C) Demographic performance
(D) Forest and Ecology
(E) Tax effort
Choose the correct answer from the options given below :

Correct option is A

Correct Answer: 1. (A), (B), (C), (D), (E)
Explanation:

• The Fifteenth Finance Commission (XV FC), chaired by N.K. Singh, recommended the following criteria and weights for the horizontal devolution of central taxes to states for the period 2021-26:
  • Income Distance (A): 45% (Highest weight, to promote equity).
    
  • Area (B): 15% (Tied with Population 2011).
    
  • Demographic Performance (C): 12.5% (Rewarding states for controlling population growth).
    
  • Forest and Ecology (D): 10% (Rewarding ecological services).
    
  • Tax and Fiscal Effort (E): 2.5% (Lowest weight, rewarding tax collection efficiency).
    
• Thus, the descending order of weightage is: Income Distance > Area > Demographic Performance > Forest & Ecology > Tax Effort.
  

Information Booster:

• Population Criterion: The XV FC used Population (2011) data with a 15% weight, replacing the 1971 population used by previous commissions. To address concerns of states that controlled population effectively (like Southern states), the new criterion of "Demographic Performance" (12.5%) was introduced.
  
• Vertical Devolution: The total share of states in central taxes was recommended at 41%, a slight reduction from the 14th FC's 42% to account for the new status of J&K and Ladakh as Union Territories.
  

Additional Information:

• Income Distance: This is the distance of a state's per capita GSDP from the state with the highest per capita income (Haryana was used as the benchmark).
  
• Forest & Ecology: This criterion considers the share of the dense forest of each state in the total dense forest of all states.