Finance Commission

Article -280 ·         Quasi-judicial body after in India

·         Instituted by President of India every fifth year or at earlier time as a required

Finance Commission Composition Consist a chairman + 4 other members – Tenure by POI/ Reappointment eligible.

Chairman experience in public affairs

1.       A judge of high court or one qualified to be appointed as one.

2.       Specialised knowledge of finance & account of govt.

3.       Special knowledge of economics

4.       Wide experience in administration & Financial matters.

Functions To make recommendation to POI, on following matters-

1.       Tax allocation & distribution of tax b/w center & state 29% – 12 FC, 32- 13th FC, 14% = 42%

2.       Principle that should grant in aid.

1)  Fiscal Capacity – 50%

2)  Population –  17.5% (till 13th) and

10% (2011)

3)  Area – 15%

3.       Measure needed to augment the CF of state to supplement.

Advisory Role ·         Recommendation made by the financial commissions are only of advisory nature – therefore not binding on the government.

·         Constitution envisages financial commission as a balancing wheel of fiscal federalism – till 2014 the Centre state fiscal relations was undermined by the planning commission (non-constitutional and non-statutory body)

·         In 2015 planning commission was replaced by NITI Aayog – National Institute For Transforming India

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