Seventh Finance Commission

The Seventh Finance Commission was incorporated in the year 1978. The commission makes recommendations for the distribution of net proceeds of taxes in the Union and states under Article 275 of the Constitution of India. The seventh finance commission also makes recommendations for the provisions regarding grants-in-aid for the states in India which need financial aid to uplift their income, it suggests changes if required in the net proceeds of taxes and additional duties, it modifies the rules related to the net proceeds of additional excise duties levied on various commodities,

it takes note of the grants-in-aid available to the tax levied upon the railway passenger fares, and the grants-in-aid to be made available to the States in terms of Wealth Tax on agricultural land.

Main activities carried out by the Seventh Finance Commission

• It makes recommendations for the distributions of net proceeds of taxes between the Union and states under Chapter I of Part XII of the Constitution of India and allots shares between the states of the country


• It makes recommendations for the grants-in-aid for the states who require financial assistance to raise the income and these financial aids comes from the Consolidated Fund of India


• The commission can also suggest changes for the net proceeds and additional duties with respect to property excluding the agricultural land


• It also modifies the additional duties if required in the commodities such as sugar, tobacco, cotton fabrics, woolen fabrics, and rayon and artificial silk fabrics


• The commission is also responsible for the fiscal management systems in the states


• It also ensures reasonable returns on investments made in irrigation and power projects, transport schemes, and the industrial and commercial organizations


• It also reviews the policies with regard to the funding of relief expenditure by the states


• It evaluates the non-plan capital gap of the states in India with respect to the five year plan

Important members involved in the Seventh Finance Commission

Chairman - Shri J.M. Shelat

Other important members-
Dr. Raj Krishna
Dr. C.H. Hanumantha Rao
Shri H.N. Ray
Shri V.B. Eswaran, Member Secretary

Highlights of the Seventh Finance Commission

• Non-Plan Capital gap of Statesv
• Additional Duties of Excise
• Financing of Relief Expenditure
• Up gradation of Standards of Administration
• Reassessment of the Forecasts of State Governments
• Center-State financial relations and the Scheme of Transfers to the States
• Estate duty in respect of Property other than agricultural land
• Grant on account of Wealth tax on Agriculture Property
• Estate duty in respect of Property other than agricultural land
• Summary of Recommendations
• Grant on account of Wealth tax on Agriculture Fares
• Reassessment of the resource forecast of the Central Government