Finance Commission

Q.1. What is the Finance Commission?

Ans. The Finance Commission is constituted by the President under article 280 of the Con-
stitution, mainly to give its recommendations on distribution of tax revenues between the
Union and the States and amongst the States themselves. Two distinctive features of the
Commissions work involve redressing the vertical imbalances between the taxation powers
and expenditure responsibilities of the centre and the States respectively and equalization of
all public services across the States.

Q.2 What are the functions of the Finance Commission?

Ans. It is the duty of the Commission to make recommendations to the President as to

the distribution between the Union and the States of the net proceeds of taxes which
are to be, or may be, divided between them and the allocation between the States of
the respective shares of such proceeds.
the principles which should govern the grants-in-aid of the revenues of the States out of
the Consolidated Fund of India.
the measures needed to augment the Consolidated Fund of a State to supplement the
resources of the Panchayats in the State on the basis of the recommendations made by
the Finance Commission of the State.
the measures needed to augment the Consolidated Fund of a State to supplement the
resources of the Municipalities in the State on the basis of the recommendations made
by the Finance Commission of the State.
any other matter referred to the Commission by the President in the interests of sound
nance.
The Commission determines its procedure and have such powers in the performance of
their functions as Parliament may by law confer on them.