The Finance Commission of India is a constitutional body established under Article 280 of the Indian Constitution. It is constituted by the President of India every five years to recommend the distribution of tax revenues between the Union and the States and among the States themselves. The Commission also addresses issues related to fiscal consolidation and the financial relationship between the Union and the States. The provisions concerning the Finance Commission are detailed in Part XII of the Constitution, emphasizing its role in maintaining a balanced and equitable financial structure within the federal system of India.

Key Functions of the Finance Commission

1.Distribution of Tax Revenues: The Commission determines how tax revenues should be divided between the central government and the state governments to ensure fairness and equity.

2.Principles for Distribution: It recommends the principles for distributing taxes and grants-in-aid among the states to ensure each state receives adequate financial resources.

3.Augmenting State Resources: The Commission suggests measures to increase the financial resources available to state governments, helping them manage their finances better.

4.Advisory Role: The Commission advises the President of India on other fiscal matters, such as financial stability and debt management, to ensure sound financial practices across the country.

Frequency and Mandate

1.Five-Year Interval: The Finance Commission is set up every five years, as mandated by the Constitution, to review and make recommendations on the distribution of financial resources.