Step 1: Define percentage of urban population. This is the proportion of a state's total population that lives in urban areas.
Step 2: Recall the data from the 2011 Census. According to the 2011 Census, the state with the highest percentage of its population living in urban areas was Goa, with 62.17%. Among the larger states, Tamil Nadu had the highest percentage (48.4%).
Step 3: Select the correct option. Since Goa is an option and has the highest percentage overall, it is the correct answer.