Finance Commission of India

The Finance Commission is sanctioned in Article 280 of the Indian Constitution. It was first established in 1951 by the President of India to define the financial relations and dealings between the central government of India and the individual state governments.

What does the Constitution say?

  • As per Article 280 of the Indian Constitution, the Finance Commission is appointed every five years and comprises of a chairman and four other members.
  • Additional details like the terms of qualification for an appointment, the appointment to and the disqualification from the finance commission, the term, eligibility and powers of the Finance Commission have been defined in The Finance Commission (Miscellaneous Provisions) Act, 1951.

Even after the formation of the First Finance Commission, the changing macroeconomic situation of the Indian economy has led to the adoption of several changes proposed in the Finance Commission’s recommendations over the years.

The 15th Finance Commission

  • Till date, there have been fifteen finance commissions. The latest finance commission was constituted in 2017 and is currently chaired by N. K.Singh, a former member of the Planning Commission.
  • As per the commission itself, the main tasks of the before it are to “strengthen cooperative federalism between center and state, improve the quality of public spending and help protect fiscal stability”.
  • However, compared to past commissions, commission’s job has become harder due to the unveiling of the goods and service tax (GST).
  • This has taken certain powers concerning taxation away from the union and the states, and, given it to the newly formed GST Council.

Why is it in the news?

The commission was scheduled to finalize its report by October 30 this year. However, it has been granted a month’s extension. It will now submit its report by November 30. The formula proposed by the 15th Finance Commission for the devolution of funds to States by the Centre for the next five years will commence April 1, 2020.




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