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Indian Economy / Fiscal System

Functions of Finance Commission of India


    The Finance Commission of India is a constitutional body and is established by the President under the Article 280 of the Indian Constitution. It came into existence from 1951. It deals with devolution of central taxes and duties among the Centre and the states. According to the Constitution, the Finance Commission will be appointed for every five years and it will consist of one chairman and four other members.

    Qualification of Members of Finance Commission

    Though the Constitution did not mention the qualifications required for either the Chairman or the members, the Chairman is selected from the people having experience in public affairs. The remaining four members are selected as per the following requirements

    • member having the qualifications that are needed to be appointed as a judge of a high court,
    • member having the knowledge of Government finances or accounts,
    • member having experience in administration as well as financial expertise,
    • member having special knowledge on Economics

    Functions of Finance Commission

    • It is involved in distribution of net tax proceeds between the Centre and States.
    • It makes recommendations to the Indian President with regards to the measures that need to be taken to enhance the funds of a State to augment the resources of local bodies in the state.
    • It also determines the basic principles that control the Grants-in-Aid given to the states.
    • Any other matter which is referred to it by the President of India in concern with sound finance.