Tax devolution is a process through which central taxes are distributed among the states in India. This system of tax devolution is significant for the States in several ways:

• Firstly, it empowers the states with more financial resources which can be used for developmental activities such as building infrastructure, improving education and healthcare facilities, and more.
• It gives the states political and economic autonomy to take decisions based on local needs and demands, leading to more efficient decision-making processes and better governance.
• Tax devolution makes the states more accountable to their people as they are directly responsible for their own revenue generation and expenditure.
• It helps in bridging the fiscal gap between the different states, leading to a more equitable distribution of resources.
• Lastly, tax devolution promotes cooperative federalism by ensuring that states have a voice and a role in national decision-making processes.

Overall, tax devolution is essential for the States in India as it helps in promoting balanced growth across the country and strengthens the federal structure of the nation.