Write a note on the Finance Commission of India

Question: Write a note on the Finance Commission of India. [BJS 1978]

Find the answer to the mains question only on Legal Bites. [Write a note on the Finance Commission of India.]

Answer

Finance Commission is constituted by the President under article 280 of the Constitution, mainly to give its recommendations on the distribution of tax revenues between the Union and the States and amongst the States themselves. It was enacted on November 22, 1951. Currently, the 15th Finance Commission is in place under the Chairmanship of Shri N. K. Singh, for a period of 5 years – April 2020 to March 2025.

Composition of the Commission:

As per the provisions contained in the Finance Commission [Miscellaneous Provisions] Act, 1951 and The Finance Commission (Salaries & Allowances) Rules, 1951, the Chairman of the Commission is elected from among persons who have had experience in public affairs, and the four other members are selected from among persons who:

• are, or have been, or are qualified to be appointed as Judges of a High Court; or
• have special knowledge of the finances and accounts of Government; or
• have had wide experience in financial matters and in administration; or
• have special knowledge of economics

Two distinctive features of the Commission’s 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.

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 maybe, 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 and 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 finance.

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