Article 280 Finance Commission, Fifteenth Finance Commission Report

Finance Commission

Article 280 of the Constitution of India provides for a finance commission as a quasi judicial body. It is constituted by the president of india every fifth year or at such earlier time as he considers necessary. The first chairman of the finance commission was K. C Neogy


The finance commission consists of a chairman and four other members to be appointed by the president. They hold office for such period as specified by the president in his order.

The Constitution authorises the parliament to determine the qualifications of members of the commission and the manner in which they should be selected. Accordingly, the parliament has specified the qualifications of the chairman and members of the commission. The chairman should be a person having experience in public affairs and the four other members should be selected from amongst the following:

  • A judge of high court Or one qualified to be appointed as one.
  • A person who has specialised knowledge of finance and accounts of the government.
  • A person who has wide experience in financial matters and in administration.
  • A person who has special knowledge of economics.

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Functions –

The finance commission is required to make recommendations to the president of india on the following matters :
The distribution of the net proceeds of taxes to be shared between the center and the states, and the allocation between the states of the respective shares of such proceeds.

The Finance Commission is constituted by the President under article 280 of the Constitution, mainly to give its recommendations on distribution of tax revenues between the Union and the States and amongst the States themselves.

The principles that should govern the grants -in -aid to the states by the center. The measures needed to augment the consolidated fund of a state to supplement the resources of panchayats and the Municipalities in the states on the basis of the recommendations made by the state finance commission. Any other matter to it by the president in the interest of sound finance.

Till 1960, the commission also suggested the grants 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 submit it’s report to the president. He lays it before both the houses of parliament along with an explanatory memorandum as to the action taken on its recommendations.

Advisory role –

It must be clarified here that the recommendations made by the finance commission are only of advisory nature and hence, not binding on the government. It is up to the Union Government to implement it’s recommendations on granting money to the states .

It is nowhere laid down in the Constitution that the recommendations of the commission shall be binding upon the government of India or that it would give rise to a legal right in favour of the beneficiary states to receive the money recommended to be offered to them by the commission.

 As rightly observed Dr. P. V Rajamanner, the chairman of the fourth finance commission " Since the finance commission is a Constitutional body expected to be quasi judicial, it's recommendations should not be turned down by the government of India unless there are very compelling reasons "

The 15th finance Commission-

The Fifteenth chairman of the finance commission was N. K Singh. The 15th finance commission summits it’s report for 2021-22 to 2025-26 to the president of India. The report was submitted in 2020 which was accepted by the Union Government and tabled in the parliament on 30 January 2020 . The shares of states in the central taxes for the 2021-26 period is recommended to be 41 percent . This is less than 42% share recommended by the 14th finance commission for 2015-20 period. The adjustment of 1% is for the newly formed Union territory of Jammu and Kashmir and Ladakh from resources of the center.

The 1st finance commission was set up in 1951. The 15 th finance commission was constitued on 27 nov 2017. The 15th finance commission recommendations for devolution of taxes and other fiscal matters . The finance commission has used different criteria while deciding the devolution for states. To maintain equality among states, states with lower per capital income would be given as higher share. Demographic performance criterion was 1st time introduced by the 15th finance commission.

The demographic performance is a reward basis effort made by states in controlling their population. The 15 th finance commission used certain criteria while determined the share among the states., (1) 15% for the population in2011, (2) 45% for the income distance, (3) 15%for the area, (4) 10% for forest and ecology, (5) 12.5%for tax effort.

Up and Bihar have received the largest devolution for 2020-21 receiving Rs 1,53,342 core and 86,039 core respectively. Karnataka and kerla saw the largest decrease in share of the divisible pool with a decrease of 0.49%and 0.25% respectively.

The 15th finance commission also suggested grants in aid which divided into five categories

  1. revenue deficit grants
  2. grants for local government
  3. grants for disaster management
  4. sector specific grants and
  5. state spacific grants

14 states are evaluated to face a revenue deficit post devolution. To cover up this deficit, the commission has recommended revenue deficit grants worth Rs 74,341 core to these 14 states. the commission has recommended increasing the state expenditure on health upto 8%by 2022. Ayush should be encouraged as an elective subject for medicine undergraduates. the 15th finance commission has recommended Rs 5,078 core of total grant for the promotion of online education.

According to the new education policy 2020 the commission recommended Rs1065 core has been assigned for the development of professional courses in regional Languages. in each states two colleges should convert their teaching material and pedagogy into the recognized regional language. the commission recommended to build a non lapsable pool for the Defence under the public accounts of India.

According to the commission’s suggestion the contribution of states of the states Disaster Risk Fund (SDRF) to be 25% except by the North -East states (10%only) The 15th finance commission recommended to replacement of planning Commission with Niti_Aoyog, implementation of GST reforms, and abolition of the planned and non planned expenditure.

14 finance commission period

The Fourteenth Finance Commission (FC-XIV) was constituted by the President on 2 January 2013 to make recommendations for the period 2015-20. Dr. Y. V. Red dy was appointed the Chairman of the Commission. Ms. Sushama Nath, Dr. M. Govinda Rao and Dr. Sudipto Mundle were appointed full time Members. Prof. Abhijit Sen was appointed as a part-time Member. Shri Ajay Narayan Jha was appointed as Secretary to the Commission.

When was the 14th finance commission formed?

The Fourteenth Finance Commission (FC-XIV) was constituted by the President under Article 280 of the Constitution on 2 January 2013 to make recommendations for the period 2015- 20. Dr. Y. V. Reddy was appointed the Chairman of the Commission.

14 finance commission period?

The Fourteenth Finance Commission of India was a finance commission constituted on 2 January 2013. The commission’s chairman was former Reserve Bank of India governor Y. V. Reddy and its members were Sushma Nath, M. from that time

What are the terms of reference of 14th Finance Commission?

While the terms of reference for the 14th Finance Commission were to use the 1971 Census data for determining devolution of heavy taxes, duties and grants-in-aid. The Central government asked the 15th Finance Commission’s ToR to use the correct 2011 data. This move would result in lower resource allocation to the Southern States of india.


With greater fiscal space GOMMISSION% increase in the states share of the shareable of the central taxes of States can meaningfully Contribute to the overall growth and development in their regions, thereby adding to the aggregate growth of the nation. Huge tax devolution could …

Difference between Finance Commission and Planning Commission of India


  1. A constitutional body
  2. Development Process Through Allocation of Plan Expenditure


  1. An organ of the Union government
  2. Maintenance Process through Allocation of Non-Plan Expenditure

Planning Commission of India (PC)

Prime minister was the ex officio chairman of the planning commission assisted by a deputy chairman. It included 6 union cabinet ministers as its ex officio members. There was also a member secretary.

The planning commission was an autonomous body, which worked closely with union and state cabinets and had full knowledge of their policies. Institutionally it was a part of the cabinet organization and the ‘demands for grants’ for the PC was included in the budget for the cabinet secretariat.

The Planning Commission was set -up on March 15, 1950 under the chairmanship of JL Nehru, by a resolution of Union Cabinet. It is an extra- constitutional, non statutory body. It consists of Prime minister

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