Finance Commission of India, Functions, Article, Qualifications

Finance Commission

Finance Commission: Constitution of India is one of the lengthiest written constitutions. One of the sections of the Constitution that talks about the Constitutional Bodies and Finance Commission of India is one of the constitutional bodies in the Indian Constitution. The Finance Commission is constituted by the Indian President after every five years. At present 15^th Finance Commission has been constituted for the period of 2021 – 2026 under the chairmanship of NK Singh.

Finance Commission of India

The Finance Commission of India has been mentioned under Part XII, Chapter I (Finance) in Articles 280 and 281 of the Indian Constitution. Finance Commission is a quasi-judicial body which recommends the Indian President in matters related to financial distribution between union and state government by demarcating the set of formulas and mechanisms as needed to the situation in the country and Constitution.

Composition of Finance Commission of India

In India the Finance Commission is composed of a total of five members of which one is the Chairman of the Finance Commission and the other four members of the Finance Commission who are appointed by the President of India. It is to be noted that they are also eligible for being reappointed to the Finance Commission by the President.

Qualification of Finance Commission Members

The Parliament has been empowered by the Indian Constitution in order to determine the qualification and manner required through which the member of the Finance Commission is selected. The Chairman should be a person with a good experience in the field of public affairs and the other four members needs to be from the following:

• High Court Judge or qualified to be the HC Judge
• Need to have specialized Knowledge of Accounts and Finance of the Indian Government.
• Vastly experienced in the field of administration and finance
• Specialised knowledge in the field of economics

Finance Commission Functions

The prominent function of the Finance Commission is to recommend the Indian President in the matters such as:

• Shares of tax distribution between center and state government
• Determine the principle based on which the centre will give states the grants-in-aid of the Consolidated Fund of India.
• Other matters as prescribed by the Indian President.
• Based on the Finance Commission’s recommendations, steps must be taken to increase the state’s consolidated funds in order to support the resources of the panchayat and the municipality.

Note: The last function regarding financial assistance to the Panchayat and Municipality was added after the 73^rd and 74^th CAA 1992 which granted constitutional status to Panchayat and Municipality.

Finance Commission Report

The report made by the Finance Commission is being submitted to the President of India which he keeps before either house of the Parliament for taking necessary action on the recommendation. Although it needs to be understood that Finance Commission reports are advisory in nature only hence it is not binding on the government.

15^th Finance Commission

The 15^th Finance Commission has been appointed for the period of 2021 – 2016 by the President of India and submitted its report on 1^st February 2021. Recommendations made by the 15^th Finance Commission have been mentioned below:

• It is recommended that 41% of the net proceeds go to the Centre and the States.
• Created with the goal of enhancing cooperative federalism, enhancing the standard of public spending, and assisting in preserving budgetary stability.
• It was necessary to examine how the 14th Commission’s recommendation would affect the Center’s financial standing.
• The effect of GST on the economy needed to be studied.
• It is necessary to suggest performance-based rewards for the states based on their initiatives to manage the population, advance business-friendliness, and restrain spending on populist measures, among other things.

List of Finance Commission Chairman

In India since 1951 till date, a total of fifteen Finance Commission has been constituted. The List of Finance Commissions Chairman has been mentioned in the table below:  

Finance Commission UPSC

Indian Constitution in India provides Finance Commission as a balancing wheel of fiscal federalism. The Finance Commission since 2014 was undermined in central-state relations due to the presence of the Planning Commission. A step in the right direction towards decentralising finance is abolishing the Planning Commission and increasing support for the 15th Finance Commission’s plan to transfer 41% of taxes to the States.

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