Finance Commission of India

The Finance Commission is a constitutional body established for the purpose of distribution of specified revenue resources between the Union government and the state government. It was constituted under Article 280 of the Indian Constitution by the Indian President to outline the financial relations between the Centre and the states. It was established in the year 1951.

Article 280 of the Indian Constitution

• President has to constitute Finance Commission of India, after 2 years of commencement of Indian Constitution and thereafter every 5 years;
• It shall be the duty of the Commission to make recommendations to the President in relation 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;
• any other matter referred to the Commission by the President in the interests of sound finance;
• The Commission shall determine their procedure and shall have such powers in the performance of their functions as Parliament may by law confer on them.

Article 281 of the Indian Constitution
It is related to the recommendations of the Finance Commission. The President has to lay the recommendation made by the Finance Commission and its explanatory memorandum before each House of Parliament.

Finance Commission Chairman and Members

• Chairman: Heads the Commission and presides over the activities. He should have had public affairs experience.
• Four Members.
• The Parliament determines legally the qualifications of the members of the Commission and their selection methods.

Role of Finance Commission as Advisory
The recommendations of the Finance Commission are only advisory and not binding on the Government. The Government governs its outlay based on the recommendations made as to money to be given to states. Put differently, ‘There is nowhere prescribed in the Constitution that the recommendations of the commission shall bind the Government of India, or it would amount to a legal right on the part of the recipient states to receive money, which the commission has recommended be given to them.

Finance Commission List