Q. Consider the following statements about Finance Commission:
1. It is a quasi-Judicial body.
2. It is required to make recommendations to parliament with respect to distribution of proceeding of taxes between centre and states.
Which of the statements given above is/are correct?

[A] 1 only

[B] 2 only

[C] Both 1 and 2

[D] Neither 1 nor 2

Answer: A
  • Article 280 provides for a Finance Commission as a quasi-judicial body. It is constituted by the President every fifth year or even earlier.
  • It is required to make recommendations to the President on the following matters:
  • The distribution of the net proceeds of taxes to be shared between the Centre and the states, and the allocation between the states, the respective shares of such proceeds.
  • The principles which should govern the grants-in-aid to the states by the Centre (i.e., out of the Consolidated Fund of India).
  • The measures needed to augment the consolidated fund of a state to supplement the resources of the panchayats and the municipalities in the state on the basis of the recommendations made by the State Finance Commission.
  • Any other matter referred to it by the President in the interests of sound finance.