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.