15th Finance Commission

  • The Union Cabinet chaired by the Prime Minister Narendra Modi has approved setting up of 15th Finance Commission (FC).
  • It is a constitutional obligation to set up FC under Article 280 (1) of the Constitution.
  • The Terms of Reference for 15th FC will be notified in due course of time. In terms of constitutional provisions, setting up 15th FC, its recommendations will cover five years commencing on April 1, 2020.15th Finance Commission
  • The recommendations of the 15th Finance Commission will be implemented in the period 1 April 2020 to 31 March 2025.
  • The 14th Finance Commission is considered to have fundamentally reset the centre-state fiscal relationship by raising the untied share of states in net central taxes to 42% from 32% after ending discretionary resource transfers from the centre to the states.
  • Economist Indira Rajaraman, who was a member of the 13th Finance Commission opined the 15th Finance Commission will change considerably after GST was implemented.

About Finance Commission:

  • The Finance Commission was established by the President of India in 1951 under Article 280 of the Indian Constitution.
  • It was formed to define the financial relations between the central government of India and the individual state governments.
  • The Finance Commission (Miscellaneous Provisions) Act of 1951 additionally defines the terms of qualification, appointment and disqualification, the term, eligibility and powers of the Finance Commission. 
  • As per the Constitution, the Commission is appointed every five years and consists of a chairman and four other members..
  • Since the institution of the first Finance Commission, stark changes in the macroeconomic situation of the Indian economy have led to major changes in the Finance Commission’s recommendations over the years.


  1. Distribution of net proceeds of taxes between Center and the States, to be divided as per their respective contributions to the taxes.
  2. Determine factors governing Grants-in Aid to the states and the magnitude of the same.
  3. To make recommendations to president as to the measures needed to augment the Fund of a State to supplement the resources of the panchayats and municipalities in the state on the basis of the recommendations made by the Finance Commission of the state.
  4. any other matter related to it by the president in the interest of sound finance
  5. finance commission is antonomous body which is governed by the government of india

Qualifications of the members:

The Chairman of the Finance Commission is selected from people with experience of public affairs. The other four members are selected from people who:

  1. Are, or have been, or are qualified, as judges of High Court,
  2. Have knowledge of Government finances or accounts, or
  3. Have had experience in administration and financial expertise; or
  4. Have special knowledge of economics

Procedure and Powers of the Commission

The Commission has the power to determine their own procedure and:

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

Disqualification from being a member of the Commission

A member may be disqualified if:

  1. He is mentally unsound;
  2. He is an undischarged insolvent;
  3. He has been convicted of an immoral offence;
  4. His financial and other interests are such that it hinders smooth functioning of the Commission.

Terms of Office of Members and Eligibility for Reappointment

  • Every member 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.

Source: TH & Wiki

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