- The Finance Commission of India came into existence in 1951 under Article 280 of the Indian Constitution.
- It was formed to
define the financial relations between the Centre and the State.
- The Finance Commission Act of 1951 states
the terms of qualification, appointment and disqualification, the term,
eligibility and powers of the Finance Commission.
- The commission is
appointed every five years.
- It is a quasi-judicial body.
Composition
It consists of a
chairman and four other members.
The chairman must be a person having 'experience in public
affairs, and the other four members must be appointed from amongst the
following
(a) A High Court judge or one qualified to be appointed as
such;
(b) A person having special knowledge of the finances and
accounts of the government;
(c) A person having
wide experience in financial matters and administration;
(d) A person having
special knowledge of economics,
(e) A person familiar with measures needed to augment the
consolidated fund of a state to supplement the resources of the panchayats in
the state.
Functions
Functions of the Finance Commission can be explicitly stated
as:
(a) Distribution of
net proceeds of taxes between Centre and the States, to be divided as per their
respective contributions to the taxes.
(b) The principles which should govern the grants-in-aid of
revenues to the states out of the consolidated fund of India;
(c) Work with the State Finance Commissions and suggest
measures to augment the Consolidated Fund of the States so as to provide
additional resources to Panchayats and Municipalities in the state.(added by 73rd and 74th Amendment Act)
(d) Any other matter
referred to the commission by the President in the
interests of sound finance.
The commission submits its report to the President and he
lays down the report before the Parliament.
The recommendations of commission are only advisory and not
binding on the Government.