16TH FINANCE COMMISSION (Syllabus: GS Paper 2 - Polity)

News-CRUX-10     1st January 2024        

Context: The Government of India, with the approval of the President of India, has constituted the Sixteenth Finance Commission, in pursuance to Article 280(1) of the Constitution.

Finance Commission

  • About: Article 280 of the Constitution of India provides for a Finance Commission as a quasi-judicial body. 
  • Constituted by: President of India every fifth year or at such earlier time as he considers necessary.
  • Composition: Chairman and four other members to be appointed by the president.
  • Tenure: They hold office for such period as specified by the president in his order.
  • Recommendation of Commission: The recommendations made by the Finance Commission are only of advisory nature, not binding on the government.
  • Fifteenth Finance Commission was constituted: On November 27, 2017.
  • Power and Functions

oThe distribution of the net proceeds of taxes to be shared between the Centre and the states.

oThe principles that should govern the grants-in-aid to the states by the Centre (i.e., out of the consolidated fund of India).

oAny other matter referred to it by the president in the interests of sound finance.

The Sixteenth Finance Commission shall make recommendations as to the following matters, namely: 

  • The distribution between the Union and the States of the net proceeds of taxes which are to be, or may be, divided between them under Chapter I, Part XII of the Constitution 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 and the sums to be paid to the States by way of grants-in-aid of their revenues under Article 275 of the Constitution for the purposes other than those specified in the provisos to clause (1) of that article.