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From UPSC perspective, the following things are important :
Prelims level: XVI Finance Commission and its terms of references
Why in the News?
The Sixteenth Finance Commission (chaired by Arvind Panagariya, the former Vice-Chairman of NITI Aayog) has constituted an Advisory Council of five members.
Role and Functions of the Advisory Council
- To advise the Commission on any of the Terms of Reference (ToR) or related subjects that may be of relevance.
- To assist in the preparation of papers or research studies and to monitor or assess studies commissioned by the Finance Commission, thereby enhancing the Commission’s understanding of the issues in its ToR.
- To help broaden the Commission’s ambit and understanding by seeking the best national and international practices on matters pertaining to fiscal devolution and improving the quality, reach, and enforcement of its recommendations.
About Finance Commission
- The Finance Commission is a Constitutional body created every five years to transfer financial resources from the centre to states.
- It is a quasi-judicial body.
- The origin of the Finance Commission lies in Article 280 of the Constitution.
- The President of India shall constitute a Finance Commission every five years to give recommendations about the transfer of central revenues (tax) to the states and its allocation among them (states).
- The recommendations of the Fifteenth Finance Commission are valid up to the financial year 2025-26.
Composition of the FC:
- The Finance Commission consists of a chairman and four other members appointed by the President.
- They hold office for such a period as specified by the president in his order and are eligible for reappointment.
Qualifications:
- Parliament determines the qualifications of members of the commission and the manner in which they should be selected.
- Chairman should be a person having experience in public affairs, and
- Four other members should be selected from amongst individuals with specialized knowledge of finance, accounts, economics, or administration.
Terms of Reference for 16th Finance Commission
- Division of Tax Proceeds, principles for Grants-in-Aid, enhancing State Funds for Local Bodies and evaluation of Disaster Management Financing
PYQ:[2023] Consider the following:
For the horizontal tax devolution, the Fifteenth Finance Commission used how many of the above as criteria other than population area and income distance? (a) Only two |
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