Centrally sector scheme: Central sector schemes are schemes with 100% funding by the Central government and implemented by the Central Government machinery. The central sector schemes are mainly formulated on subjects mainly from the Union List. Besides, there are some other programmes that various Central Ministries implements directly in States and UTs which also comes under Central Sector Schemes. In these schemes, the financial resources are not shifted to states.
Centrally sponsored scheme: Centrally Sponsored Schemes are the schemes by the centre where there is financial participation by both the centre and states. Historically, CSS is the way through which central government helps states to run its Plans financially.
A stipulated percentage of the funding is provided by the States in terms of percentage contribution. The ratio of state participation may vary in 50:50, 60:40, 70:30, 75:25, or 90:10; showing higher contributions by the centre. Various central government ministries directly transfer money to the state governments. Implementation of Centrally Sponsored Scheme is made by State/UT Governments. Centrally Sponsored Schemes are created on areas that are covered under the State List.
Centrally Sponsored Schemes are divided into three: core of the core, core and optional. Though each scheme envisages financial participation from the states as well, the state share differs for different schemes. Similarly, geographically difficult states will get higher central share.