Finance Commission

Under Article 280 of the Constitution, the President is required to appoint a new Finance Commission every five years. The composition of the Commission consists of a Chairman and four members. The Parliament determines their qualifications and the method of selection. The Chairman and members of the Finance Commission are appointed by the President of India. The Chairman and members can be reappointed after the completion of their term. The qualifications of the Chairman of the Finance Commission are determined by Parliament based on work experience in public affairs. The 16th Finance Commission was constituted in 2023 to make recommendations for a period of five years from 1 April 2026 to 31 March 2031. The State Finance Commission functions at the state level. It is a constitutional body. The State Finance Commission was formed under the 73rd Amendment to the Constitution, which came into force in 1992.

Qualifications of Members of the Finance Commission

■ A High Court Judge or a person qualified to be a High Court Judge.

■ A person with special knowledge of financial matters and financial matters related to the government.

■ A person with experience in public administration and financial matters.

■ A person with special knowledge of economics.

Main duties of the Finance Commission

The Finance Commission reports to the President. The President submits the said report to the Parliament. The recommendations made by the Finance Commission are in the form of advice. The Central Government is not obliged to follow the said recommendations. The subjects on which the Finance Commission makes recommendations to the President,

■ Matters relating to the distribution of taxes between the Centre and the States.

■ Matters relating to the basic principles of grants-in-aid to the States by the Centre.

■ Matters relating to the basic principles of the share to be given to the Panchayats and Municipalities from the State Consolidated Fund by the State Finance Commission.

■ Directions for the implementation of the matters given by the President from time to time on financial matters.