Finance Commission

 

  • Article 280 of the Constitution of India provides for FC as a quasi-judicial body.
  • It is constituted by the President of India every fifth year
  • Article 280(1) of Constitution lays down that FC should be constituted within two years from commencement of Constitution. Thereafter at expiration of every fifth year or at such earlier time as President considers necessary.
  • In keeping with this requirement, practice has generally been to set up next FC within five years of date of setting up of the previous Finance Commission.
  • The recommendations of 15th Finance Commission (FFC) will come into effect from 1 April 2020.
  • It consists of a chairman and four other members to be appointed by the president.
  • The recommendations made by FC are only advisory in nature and hence, are not binding on the government.
  •  It makes recommendations about the following to the President of India:
  • Distribution of net proceeds of taxes between centre and states and allocation between states of respective shares of such proceeds.
  • Principles that should govern grants in aid to states by centre.
  • Measures needed to augment consolidated fund of states to supplement resources of local governments in states on basis of recommendations made by State Finance Commissions.
  • Any other method referred to it by President in interests of sound finance.