Finance Commission - wikipedia Finance Commission Finance Commission of India वित्त आयोग Emblem of India Commission overview Formed November 22, 1951 ( 1951 - 11 - 22 ) Jurisdiction Government of India Headquarters New Delhi Commission executives Dr Y.V Reddy, Chairman Dr M. Govindha Rao, Member Sushma Nath, Member Prof Abhijit Sen, Member Dr Sudipto Mundle, Member Ajay Narayan Jha, Secretary Website fincomindia.nic.in Fincom India 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. There have been fourteen Commissions to date. The most recent was constituted in 2013 and is chaired by Y.V. Reddy, former Governor of the Reserve Bank of India. Contents 1 History 2 Functions 3 The Finance Commission ( Miscellaneous Provisions ) Act, 1951 3.1 Qualifications of the members 3.2 Procedure and Powers of the Commission 3.3 Disqualification from being a member of the Commission 3.4 Terms of Office of Members and Eligibility for Reappointment 3.5 Salaries and Allowances of the members 4 List of Finance Commissions 4.1 14th Finance Commission 5 Finance Commission versus Planning Commission 6 See also 7 References 8 External links History As a federal state, India suffers from both vertical and horizontal fiscal imbalances. Vertical imbalances between the central and state governments result from states incurring expenditures disproportionate to their sources of revenue, in the process of fulfilling their responsibilities. However, states are better able to gauge the needs and concerns of their inhabitants and therefore more efficient at addressing them. Horizontal imbalances among state governments result from differing historical backgrounds or resource endowments, and can widen over time. The Finance Commission was established in 1951 by Dr. B.R. Ambedkar, the then - incumbent Law Minister, to address these imbalances. Several provisions to bridge the fiscal gap between the Centre and the States were already enshrined in the Constitution of India, including Article 268, which facilitates levy of duties by the Centre but equips the States to collect and retain the same. Similarly, Articles 269, 270, 275, 282 and 293, among others, specify ways and means of sharing resources between the Union and States. In addition to the above provisions, the Finance Commission serves as an institutional framework to facilitate Centre - State Transfers. Article 280 of the Indian Constitution defines the scope of the Commission : The President will constitute a Finance Commission within two years from the commencement of the Constitution and thereafter at the end of every fifth year or earlier, as the deemed necessary by him / her, which shall include a chairman and four other members. Parliament may by law determine the requisite qualifications for appointment as members of the Commission and the procedure of selection. The Commission is constituted to make recommendations to the president about the distribution of the net proceeds of taxes between the Union and States and also the allocation of the same amongst the States themselves. It is also under the ambit of the Finance Commission to define the financial relations between the Union and the States. They also deal with devolution of non-plan revenue resources. Functions Distribution of net proceeds of taxes between Center and the States, to be divided as per their respective contributions to the taxes. Determine factors governing Grants - in Aid to the states and the magnitude of the same. 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. any other matter related to it by the president in the interest of sound finance finance commission is antonomous body which is governed by the government of india The Finance Commission ( Miscellaneous Provisions ) Act, 1951 The Finance Commission ( Miscellaneous Provisions ) Act, 1951 was passed to give a structured format to the Finance Commission and to bring it to par with world standards, by laying down rules for the qualification and disqualification of members of the Commission, and for their appointment, term, eligibility and powers. 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 : Are, or have been, or are qualified, as judges of High Court, Have knowledge of Government finances or accounts, or Have had experience in administration and financial expertise ; or Have special knowledge of economics Procedure and powers of the Commission The Commission has the power to determine their own procedure and : Has all powers of the civil court as per the Civil Procedure Code, 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 Disqualification from being a member of the Commission A member may be disqualified if : He is mentally unsound ; He is an undischarged insolvent ; He has been convicted of an immoral offence ; 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. Salaries and allowances of the members The members of the Commission shall provide full - time or part - time service to the Commission, as the President specifies in his order. The members shall be paid salaries and allowances as per the provisions made by the Central Government. List of Finance Commissions So far 14 Finance Commissions have been appointed which are as follows : Finance Commission Year of Establishment Chairman Operational Duration First 1951 K.C. Neogy 1952 -- 57 Second 1956 K. Santhanam 1957 -- 62 Third 1960 A.K. Chanda 1962 -- 66 Fourth 1964 P.V. Rajamannar 1966 -- 69 Fifth 1968 Mahaveer Tyagi 1969 -- 74 Sixth 1972 K. Brahmananda Reddy 1974 -- 79 Seventh 1977 J.M. Shelat 1979 -- 84 Eighth Y.B. Chavan 1984 -- 89 Ninth N.K.P. Salve 1989 -- 95 Tenth K.C. Pant 1995 -- 2000 Eleventh 1998 A.M. Khusro 2000 -- 2005 Twelfth 2002 C. Rangarajan 2005 -- 2010 Thirteenth 2007 Dr. Vijay L. Kelkar 2010 -- 2015 Fourteenth 2013 Dr. Y. V Reddy 2015 -- 2020 14th Finance Commission Major Recommendations of 14th Finance Commission headed by Prof. YV Reddy The share of states in the net proceeds of the shareable Central taxes should be 42 %. This is 10 percentage points higher than the recommendation of 13th Finance Commission. Revenue deficit to be progressively reduced and eliminated. Fiscal deficit to be reduced to 3 % of the GDP by 2017 -- 18. A target of 62 % of GDP for the combined debt of centre and states. The Medium Term Fiscal Plan ( MTFP ) should be reformed and made the statement of commitment rather than a statement of intent. FRBM Act need to be amended to mention the nature of shocks which shall require targets relaxation. Both centre and states should conclude ' Grand Bargain ' to implement the model Goods and Services Act ( GST ). Initiatives to reduce the number of Central Sponsored Schemes ( CSS ) and to restore the predominance of formula based plan grants. States need to address the problem of losses in the power sector in time bound manner. Finance Commission versus Planning Commission It is alleged that Planning Commission ( India ) ( PC ) which is neither a constitutional nor a statutory body has usurped the role of Finance Commission ( FC ). PC has restricted FC 's role to mere recommend grants to states on revenue account only under article 275 of Indian constitution. However, after the formation of NITI Aayog ( National Institute of Transforming India ), which comes to replace the Planning Commission seeks to empower FC with the originally envisaged task of distribution of revenue to the states. See also Part One of the Constitution of India Fiscal Responsibility and Budget Management Act, 2003 References Jump up ^ `` The Finance Commission ( Miscellaneous Provisions ) Act, 1951 ''. Retrieved 23 August 2014. Jump up ^ The Finance Commission ( Miscellaneous Provisions ) Act, Act No. 33 of 1951. Retrieved on 2017 - 07 - 22. Jump up ^ `` Reports of the Finance Commissions of India ''. Retrieved 2014 - 07 - 10. Jump up ^ `` Terms of Reference of the Fourteenth Finance Commission ''. Retrieved 2014 - 07 - 10. External links Full text of the Constitution of India ( as of July 2008 ) Homepage of the Finance Commission Indian commissions Permanent Agricultural Costs and Prices Agriculture Atomic Energy Backward Classes Cattle Competition Consumer Disputes Redressal Cooperation with UNESCO Delimitation Denotified, Nomadic and Semi-Nomadic Tribes Election Electricity Regulation Enterprises in the Unorganized Sector Farmers Finance Forward Markets Human Resources for Health Human Rights Investment Knowledge Labour Law Minorities Minority Educational Institutions Pay Planning Protection of Child Rights Public Service Railway Safety Safai Karamcharis Scheduled Castes Scheduled Tribes Statistics University Grants Women Vigilance Ad hoc Administrative Reforms Gadgil Kalelkar Kapur Khosla Laththa Commission Liberhan Mandal Mukherjee Nanavati Narendran Ranganath Misra ( Minorities ) Sarkaria Shah States Reorganisation Category List Finance Commission of India 1st 2nd 3rd 4th 5th 6th 7th 8th 9th 10th 11th 12th 13th 14th Retrieved from `` https://en.wikipedia.org/w/index.php?title=Finance_Commission&oldid=792697947 '' Categories : Indian commissions and inquiries Government finances in India Finance in India Finance Commission of India Hidden categories : Use British English from March 2013 Use dmy dates from March 2013 Articles containing Hindi - language text All articles with unsourced statements Articles with unsourced statements from July 2017 Articles with specifically marked weasel - worded phrases from July 2017 Talk Contents About Wikipedia മലയാളം Edit links This page was last edited on 28 July 2017, at 02 : 23. 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Question: who constitutes the finance commission after every five years
Answer: The President