FINANCE COMMISSION

FINANCE COMMISSION

• It is a constitutional body is also a quasi-judicial body in 

matters related to summoning & enforcing attendance 

and requisitioning any public record from any court of 

office.

• It is constituted by the President of India under Article 280 

of the Constitution which requires a Finance Commission 

(FC) to be set up every five years.

• The Finance Commission normally takes about two years to 

make their recommendations.

 As per clause (1) of Article 280 of the Constitution, the 

Finance Commission is to be constituted every fifth 

year or earlier.

• The 1st FC was constituted vide Presidential Order under 

the chairmanship of Shri K.C. Neogy on 6th April 1952.

• Core Responsibilities: The Commission must make 

recommendations to the President as to:

 The distribution between the Union and the States of 

the net proceeds of taxes which are to be, or maybe, 

divided between them and the allocation between the 

States of the respective shares of such proceeds; 

 The principles which should govern the grants-in-aid 

of the revenues of the States out of the Consolidated 

Fund of India;

 The measures needed to augment the Consolidated 

Fund of a State to supplement the resources 

of the Municipalities in the State based on the 

recommendations made by the Finance Commission of 

the State;

 Any other matter referred to the Commission by the 

President in the interests of sound finance.