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The constitutional bodies formed by the countries are required to look after various matters such as finances, education, health etc. The Finance Commission is a constitutional body formed by the country that manages the distribution of the finances and taxes efficiently.
The Finance Commission was formed at the time of India’s constitution-making to ensure smooth communication between the States and the Central Government to distribute taxes and funds as per the need of the different states in the country.
Finance Commission – An overview
The finance commission is a constitutional body that the Government of India forms to look at and manage the country’s finances.
The Finance Commission looks after the needs of the states and their financial requirements that have to be fulfilled by the central Government.
In other words, it acts as a connecting link between the centre and the States as a medium for distributing the finances.
Why was the Finance Commission Formed?
After the Independence of India from the Britishers in 1947, the Constitution of India was formed under the able guidance of Dr B.R Ambedkar. Different bodies were set up owing to the country’s different needs and departments.
The Government of India set up the Planning Commission in 1950 with two goals in mind. They were:
- Ensuring a five-year plan for the management of the finances and the budget implementation
- Providing the Finances to the states as per their needs and ensuring transparency in the overall distribution of the finances to each state.
Hence the Finance Commission established in 1951 became the First Finance Commission to be established after the Independence of India under the constitution formed. The First Commission, established in 1951, was the First Finance Commission to be formed to implement the five-year budget plan and keep the flow of the finances between the central Government and the state transparent and steady.
It was formed under the order passed by The President of India.
The order for the Finance Commission established in 1951 was passed on the 22nd of November in the year 1951. It was constituted under the Chairmanship of Mr K.C.Neogy on the 6th of April in the year 1952.
Why is the Finance Commission termed a Constitutional Body?
The Government of India formed the Finance Commission under Article 280 of the constitution. The finance Commission article says that the presence of the President of India holds a lot of importance as the budget can’t be passed without his approval.
So, when the First Finance Commission was formed, the President of India was present at the meeting of the five-year budget plan to constitute the Finance Commission body.
So, as per Article 280 of the Constitution of India, the president is required to form the Finance Commission every five years.
How many members are parts of the Finance Commission?
The number of members present in the Finance Commission is 5. The President of India strictly appoints these 5 members. Four members, along with one Chairman, constitute the Finance Commission. The Government of India keeps track of the Finance Commission and helps the body to deliver its duties efficiently. It provides all the monetary support as well as the manpower to run the organisation effectively.
Functions of the Finance Commission
Though the name suggests that this constitutional body looks after the finances, it is essential to know how the finance committee was formed and its functions.
The Functions of the Finance Commission are:
- The Finance Commission notes all the taxes and recommends to the President of India the allocation of the taxes and the funds between the States and The Union Territories.
- In the case of the distribution of the funds from the Consolidated Funds of India, the Finance Commission decides the allotment of the grants to the states from the central Government.
- Since the President of India constitutes the Finance Commission, he has the power to transfer any matter to India’s Finance Commission for a better financial plan for the country and a sound budget keeping in mind all the sections of the society to boost the economy.
The current Finance Commission
The current finance commission is the 15th Finance Commission, formed in November 2017 by the President of India. Under the Chairmanship of Mr N.K Singh, it is expected to submit its recommendation for five years. This period covers the time from 2020 to 2025.
Conclusion
The Finance Commission is a constitutional body formed to look after the taxes collected from the country’s taxpayers. It maintains the fair share of the funds and the taxes between each state and union territory.
