Question

Which of the following statements are correct about the Finance Commission of India?

i. The Finance Commission consists of a chairman and four other members appointed by the President.
ii. The recommendations of the Finance Commission are binding on the Union government.
iii. The Finance Commission recommends measures to augment the Consolidated Fund of a State to support panchayats and municipalities.
iv. The qualifications of the Finance Commission members are determined by the Parliament.

• A. Only (i, ii, and iii)
• B. Only (i, iii, and iv)
• C. Only (ii, iii, and iv)
• D. Only (i, ii, and iv)

Answer 1

Answer:

B. Only (i, iii, and iv)

Finance Commission of India

• Constitutional Basis: Article 280 of the Indian Constitution mandates the establishment of the Finance Commission, making it a constitutionally recognized body.
• Composition: The Finance Commission comprises a Chairman and four other members. These members are appointed by the President of India.
• Qualifications of Members: The Parliament of India has the authority to determine the qualifications and the method of selection of the members of the Finance Commission. This ensures that experienced individuals with expertise in finance and public administration are appointed.
• Role and Recommendations:
  • The primary role of the Finance Commission is to advise the President on the distribution of net proceeds of taxes between the Union and the States.
  • It also recommends the allocation of the same between the States themselves.
  • The Commission suggests the principles that should govern grants-in-aid from the Union to the States.
  • Crucially, it recommends measures needed to augment the Consolidated Fund of a State to supplement the resources of Panchayats and Municipalities in the State, based on the recommendations made by the State Finance Commissions.
• Nature of Recommendations: The recommendations of the Finance Commission are advisory in nature and are not binding on the Union government. While the government usually accepts the recommendations, it is not legally obligated to implement them.
• Tenure: The Finance Commission is constituted every five years or at such earlier intervals as the President considers necessary.
• Significance for Competitive Exams: Questions on the Finance Commission are frequently asked in competitive exams, covering its constitutional articles, composition, functions, and the non-binding nature of its recommendations. Understanding the distinction between the Finance Commission and State Finance Commissions is also important.