Finance Commission

• Article 280 of the Constitution of India provides for a Finance Commission.
• It is a quasi-judicial body.
• It is constituted by the president of India every fifth year.
• Composition - a chairman and four other members, appointed by the president.
• They hold office for such period as specified by the president in his order. They are eligible for reappointment
• The Parliament determines the qualifications of members.

Functions

1. The distribution of the net proceeds of taxes to be shared between the Centre and the states.
2. The grants-in-aid to the states by the Centre (out of the consolidated fund of India).
3. To increase the funds to the state for the development of the panchayats and the municipalities (recommendations made by the state finance commission).
4. Any other matters referred by the president related to the finance.

• The commission submits its report to the president. He lays it before both the Houses of Parliament.
• The recommendations made by the Finance Commission are only of advisory nature.
• The Constitution of India envisages the Finance commission as the balancing wheel of fiscal federalism in India.

List of Finance Commission-

Important Articles –

• 280. Finance Commission
• 281. Recommendations of the Finance Commission