Finance Commission
Published on 07 Jan 2025
Finance Commission
• The Sixteenth Finance Commission was
constituted with Shri Arvind Panagariya, former
Vice-Chairman, NITI Aayog as its Chairman.
• The Finance Commission (FC) is a
constitutionally mandated body that is
envisaged as the balancing wheel of fiscal
federalism in India.
• Article 280 of the constitution provides for a
Finance Commission as a quasi judicial body,
constituted by the President every 5th year
or at such earlier time as he/she considers
necessary.
Composition
- The Finance Commission consists of a
chairman and 4 other members to be
appointed by the President.
- They hold office for such a period as
specified by the President and are eligible
for reappointment.
- The constitution authorizes the parliament
to determine the qualifications of
members of the commission and the
manner in which they should be
selected.
Functions
- The FC is required to make
recommendations to the President on
the following matters.
- The distribution of net proceeds of
taxes to be shared between the centre
and the states and the allocation
between the states of the respective
shares of such proceeds.
- The principles that should govern the
grants-in-aid to the states.
- The measures needed to augment
the consolidated fund of a State
to supplement the resources of the
panchayats and municipalities on the
recommendations made by the state
finance commission.
- Any other matter referred to it by the
President in the interests of sound
finance.
Recommendations made by the FC are only of
advisory nature.