Finance Commission: Procedures and Powers of the Finance Commission, India!

Finance Commission is constituted to define financial relation between the centre and the states. Under the provisions of Article 280 of the Constitution, the President appoints a Finance Commission for the specific purpose of devolution of non-plan revenue resources. The functions of the Commission are to make recommendation to the President in respect of

a. The distribution of net proceeds of taxes to be shared between the union and the states and the allocation of share of such proceeds among the states.

b. The principles which should govern the payment of grants in aid by the centre to the states.


c. Any other matter concerning financial relations between the centre and the states.

So, far 11 Finance Commissions have been appointed and the recommendations of the various commissions can be divided under three heads

a. Division and distribution of income tax and other taxes.

b. Grants-in-aid.


c. Loans to the states by the centre.

The Finance Commission Act of 1951 states the term 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 1st Finance Commission, stark changes have occurred in the Indian economy causing the changes in the macro economic scenario. This has led to major changes in the Finance Commission’s recommendations over the years.

Procedures and Powers of the Finance Commission:

The Commission has the power to determine their own procedure:


a. Has all powers of the civil court as per the court of civil procedure, 1908.

b. Can summon and enforce the attendance of any witness or ask any person to deliver information or produce a document, which it deems relevant.

c. Can ask for the production of any public record or document from any court or office.

d. Shall be deemed to be a civil court for purposes of sections 480 and 482 of the court of criminal procedure, 1898.