Finance Commission of India

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The Finance Commission of India was officially structured and constituted as per the provisions of the Finance Commission Act of 1951. The President of India selects the chairman and four other members of the Finance Commission of India. Further, the President of India assigns the term of their office and their responsibilities. The chairman and the four members of the Finance Commission are answerable for their act of commission and omission, directly to the President of India.

The process of selection of Finance Commission of India -
  • The President of India, within maximum of two years from the commencement of the draft and thereafter completion of every fifth year or at an earlier time (as he deems necessary), by order should constitute a Finance Commission.
  • The Finance Commission shall consist of a chairman and four other members, appointed by the President himself.
  • The elected parliament may, by formulating appropriate law, determine the qualifications of such members of the Finance Commission and it may also determine the manner in which the members shall be selected.
The Qualifications of the chairman and other members of the Finance Commission of India -

The Chairman shall be a person with experience in public affairs, and the four other members shall be selected from among persons who--
  • Have been, or are qualified to be appointed as Judges of a High Court, or
  • Have special knowledge of the finances and accounts of government, or
  • Have wide experience in financial matters and in administration, or
  • Have special knowledge of economics.
Members can be disqualified on the following grounds -
  • Unsound mind
  • Undischarged insolvent
  • Convicted of an offence involving moral turpitude
  • Financial or other interest as is likely to be prejudicial to the functions of the commission.
The duties of the Finance Commission of India -

The duties of the Finance Commission shall entail recommendations to the President of India on -
  • Distribution of the income of the government (including central and state governments) as per proportion or according to the contribution made towards such collection of revenues by each such state government or central government.
  • Define the grounds on which the government should allocate the grants-in-aid of the revenues of the Indian states out of the consolidated fund of India. The quantum of allocation of such funds needs to compliment the requirements of the Municipalities in the State and the resources of the Finance Commission of the State.
  • Any other matter referred to the Commission by the President in the interests of sound finance.
  • The Finance Commission of India shall also determine the operational process and is vested with such powers in the operation as per the provisions enacted by the parliament of India.

Last Updated on : April 3, 2015