Finance Commission of India

Finance Commission of India

Article 280 of the Constitution of India provides for the appointment of a finance commission every five year by the President of India. A finance commission is a body of five experts including a chairman. President appoints the chairman and the members of this commission. Finance commission are to recommend to the President the basis for the distribution of the net proceeds of taxes between the center and the states, and the principles which should govern the grants-in-aid to be given to the states out of the consolidated funds of India and measures required to augment the Consolidated Fund of individual states during a five year period.

The Finance Commission of India came into existence in November 1951. It was formed to define the financial relations between the centre and the state. The Constitution requires the President to constitute a fresh panel every fifth year or earlier. The Finance Commission Act of 1951 states the terms of qualification, appointment and disqualification, the term, eligibility and powers of the Finance Commission.

Functions of the Finance Commission:

  • Distribution of net proceeds of taxes between Centre and the States, to be divided as per their respective contributions to the taxes.
  • The Finance commission of India also determines the principles of governing the grants-in-aids of the revenues of states out of the consolidated fund of India. It is an important function of the Indian Finance Commission.
  • This commission has the duty of considering any matter referred to the commission by the President in the interest of sound finance.
  • The Commission determines its procedure and have such powers in the performance of their functions as Parliament may by law confer on them.

Qualifications for Members of the Finance Commission:

The Chairman of the Commission is selected from among persons who have had experience in public affairs, and the four other members are selected from among persons who :

  • are, or 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 had wide experience in financial matters and in administration; or
  • have special knowledge of economics

A member may be disqualified if the person :

  • is mentally unsound;
  • is an undischarged insolvent;
  • has been convicted of an immoral offence;
  • financial and other interests are such that it hinders smooth functioning of the Commission.

Every member of the finance commission will be in office for the time period as specified in the order of the president, but is eligible for reappointment provided he has, by means of a letter addressed to the president, resigned his office.

List of Finance Commission's of India :

Finance Commission Established In  Term  Chairman
First 1951 1952-57 K. C. Neogy
Second 1956 1957-62 K. Santhanam
Third 1960 1962-66 A. K. Chanda
Fourth 1964 1966-1969 P. V. Rajamannar
Fifth 1968 1969-74 Mahaveer Tyagi
Sixth 1972 1974-79 K. Brahmananda Reddy
Seventh 1977 1979-84 J. M. Shelat
Eighth 1983 1984-89 Y. B. Chavan
Ninth 1987 1989-95 N. K. P. Salve
Tenth 1992 1995-2000 K. C. Pant
Eleventh 1998 2000-2005 A.M.Khusro
Twelveth 2003 2005-2010 C. Rangarajan
Thirteenth 2007 2010-2015 Dr. Vijay L. Kelkar
Fourteenth 2012 2015-2020 Dr. Y. V Reddy

Procedure and Powers of Finance Commission of India :

  • Has all powers of the civil court as per the Court of Civil Procedure, 1908.
  • Can summon and enforce the attendance of any witness or ask any person to deliver information or produce a document, which it deems relevant.
  • Can ask for the production of any public record or document from any court or office.
  • Shall be deemed to be a civil court for purposes of Sections 480 and 482 of the Code of Criminal Procedure, 1898.

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