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What is the Finance Commission of India?
The Finance Commission of India is a constitutional body which is constituted by the President of India under Article 280 of the Indian Constitution. The finance commissions are constituted to recommend the distribution of tax revenues between the central and state governments. It is also responsible to determine the principles that govern the grants-in-aid provided by the central government to the states. The first Finance Commission was constituted in 1951 and there have been fifteenth so far. K.C. Neogy became the first Finance Chairman of India. Read the article to have detailed knowledge about the Finance Commission of India.
Composition of Finance Commission
Finance Commission comprises a Chairman who had public affairs experience and Four Members. The Parliament determines the qualifications of the members of the Commission and their selection methods. The 4 members should be or have been qualified as High Court judges, or be knowledgeable in finance or experienced in financial matters and are in administration, or possess knowledge in economics. All the appointments are made by the President of India.
Functions of Finance Commission
There are various functions that has to be performed by the Finance Commission of India. It shall be the duty of the Finance Commission to make recommendations to the President in relation to the:
- Distribution of ‘net proceeds’ of taxes between the Center and the States, to be divided as per their respective contributions to the taxes.
- Determine factors governing Grants-in-Aid to the states and the magnitude of the same.
- To make recommendations to the president as to the measures needed to augment the 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 committee of the state.
- Any other matter related to it by the president in the interest of sound finance.
- According to the Code of Civil Procedure 1908, the Financial Commission has all the powers of a civil court. It subpoenas witnesses, asks to produce public documents or records from an office or court.
15th Finance Commission of India
The 15th Finance Commission was constituted in 2017. Its recommendations will cover a period of five years from the year 2021-22 to 2025-26. The Chairman of 15th Finance Commission is N. K. Singh, a former member of the Planning Commission and Shri Ajay Narayan Jha joined the commission as a member of Finance Commission of India.
Article 280 of the Indian Constitution
The Article 280 of Indian Constitution deals with the Finance Commission of India, this article says that President has to constitute a Finance Commission in every 5 years. The duty of Finance Commission of India is to make recommendations to the President of India which are as follows:
- The distribution of taxes between the Union and the States.
- The grants in aid of the revenues of the States from the Consolidated Fund of India.
- Any matter referred by the President of India in reference to the finance.
Article 281 of the Indian Constitution
The Article 281 of the Indian Constitution says that President has to present all the recommendations of Finance Commission in front of the Parliament.
State Finance Commission
The State Finance Commission (SFC) is created by the 73rd and 74th Constitutional Amendments (CAs) to rationalize and systematize fiscal relations at the local level in India.
• Article 243I of the Constitution mandated the State Governor to constitute a Finance Commission every five years.
• Article 243Y of the Constitution states that the Finance Commission constituted under article 243 I shall also review the financial position of the Municipalities and make recommendations to the Governor.
However, States have not been setting up their SFCs regularly as mandated by the constitutional amendment.
Finance Commission Chairman List
15 Finance Commissions have been appointed so far. Here are the names of Chairman’s of finance commission of India till now:
|Year of Appointment
|Dr. P.V. Rajamannar
|Dr. C. Rangarajan
|Dr. Vijay Kelkar
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