FUNCTIONS The Finance Commission is required to make recommendations to the president of India on the following matters: 1. The distribution of the net proceeds of taxes to be shared between the Centre and the states, and the allocation between the states of the respective shares of such proceeds. 2. The principles that should govern the grants-in-aid to the states by the Centre (i.e., out of the consolidated fund of India)
3. 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. 4. Any other matter referred to it by the president in the interests of sound finance
Till 1960, the commission also suggested the grants given to the States of Assam, Bihar, Odisha and West Bengal in lieu of assignment of any share of the net proceeds in each year of export duty on jute and jute products. These grants were to be given for a temporary period of ten years from the commencement of the Constitution. The commission submits its report to the president. He lays it before both the Houses of Parliament along witlh an explanatory memorandum as to the action taken on its recommendations.