Finance Commission

The Finance Commission in India came into force in 1951 with introduction of “The finance commission (miscellaneous provisions) act, 1951”. The Article 280 of Constitution of India provides the constitutional status to Finance Commission. It provides the framework for financial transfers from the Union to the States.
Finance Commission

The Constitution of India provides for the appointment of finance commission after every five years, even though new finance commission can earlier be appointed by the President of India

Members of Finance Commission

The Finance Commission consists of Chairman having experience in public affairs and four other members who:

  • are qualified to be appointed as Judges of a High Court; or
  • have special knowledge of the finances and accounts of Government; or
  • have had wide experience in financial matters and in administration; or
  • have special knowledge of economics.

Every member of the Commission shall hold office for such period as may be specified in the order of the President appointing him.

Responsibilities of Finance Commission

The main responsibilities of a Finance Commission are:

  • The distribution between the Union and the States of the net proceeds of taxes which are to be divided between them and the allocation between the States of the respective shares of such proceeds.
  • Determination of principles and quantum of grants-in-aid to States which are in need of such assistance.
  • Measures needed to augment the Consolidated 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.

Following the seventy third and seventy fourth amendments to the Constitutions, the Finance Commissions were charged with the additional responsibility of recommending measures to augment the Consolidated Fund of a State to supplement the resources of local bodies

To enable the Commission to discharge its responsibilities in an effective manner, the Constitution vests the Finance Commission with power to determine its procedures.


It is the quantum of grants to the State which are in need of assistance.

Previous Finance Commissions

There are fourteen finance commission constituted by government since independence as per details below:

Finance Commission Chairman Period
First K. C. Neogy 1952-57
Second K. Santhanam 1957–62
Third A. K. Chanda 1962–66
Fourth P. V. Rajamannar 1966–69
Fifth Mahaveer Tyagi 1969–74
Sixth J. M. Shelat 1974–79
Seventh K. Brahmananda Reddy 1979–84
Eighth J. M. Shelat 1984–89
Ninth Y. B. Chavan 1989–95
Tenth N. K. P. Salve 1995–2000
Eleventh A. M. Khusro 2000–2005
Twelfth C. Rangarajan 2005–2010
Thirteenth Dr. Vijay L. Kelkar 2010–2015
Fourteenth Dr. Y. V Reddy 2015–2020
Fifteenth N.K. Singh 2020–2015

Various Articles related to Finance Commission

Article Purpose
268. Duties levied by the Union but collected and appropriated by the States.
269. Taxes levied and collected by the Union but assigned to the States.
270. Taxes levied and collected by the Union and distributed between the Union and the States.
271. Surcharge on certain duties and taxes for purposes of the Union.
274. Prior recommendation of President required to Bills affecting taxation in which States are interested.
275. Grants from the Union to certain States.
280. Finance Commission.
281. Recommendations of the Finance Commission.
282. Expenditure defrayable by the Union or a State out of its revenues.