Finance Commission of India




Finance Commission of India



Composition of Finance Commission

  • Finance Commission of India consists of
    • Chairman
    • 4 other members
  • All are appointed by the president.
  • They hold office for such period as specified by the president in his order.
  • They are eligible for reappointment.
  • Constitution of India authorises the Parliament to determine the qualifications and manner of selection of members.
  • Parliament has specified the qualifications of Chairman
    • Chairman should have experience in public affairs
  • Qualifications for 4 other members
    • Judge of high court or one qualified to be appointed as one
    • Person who has specialised knowledge of finance and accounts of the government.
    • A person who has wide experience in financial matters and in administration.
    • A person who has special knowledge of economics.



Functions of Finance Commission

  • Finance Commission make recommendations to President.
  • Matters of recommendations
    • Distribution of taxes between the Centre and the states and between states
    • Parameters to giving grants-in-aid to the states by the Centre
    • Measures to use consolidated fund of a state to supplement the resources of the panchayats and the municipalities.
      • These measures made depend on the recommendations of state finance commission.
    • Any other matter referred to it by the president related to finance.
  • Till 1960, the commission also suggested the grants given to the States of Assam, Bihar, Odisha and West Bengal in lieu of export duty on jute and jute products.
  • These grants were given for a temporary period of 10 years from the commencement of the Constitution.
  • The commission submits its report to the president.
  • President lays it before both the Houses of Parliament.
  • He also submits an explanatory memorandum as to the action taken on its recommendations.



Advisory Role

  • Finance Commission of India is an advisory body.
  • Recommendations made by the Finance Commission are advisory in nature.
  • Those are not binding on the government.
  • Role of Finance commission was undermined by the emergence of Planning Commission.



Chairman of Finance Commission




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