FINANCE COMMISSION

Why in News?                                                                                                        

The Government of India, with the approval of the President of India, has constituted the Sixteenth Finance Commission, in pursuance to Article 280(1) of the Constitution.

What is 16^th Finance commission?

• Dr Arvind Panagariya, former Vice-Chairman, NITI Aayog, and Professor, Columbia University will be the Chairman. Members of the Sixteenth Finance Commission would be notified separately. Shri Ritvik Ranjanam Pandey has been appointed as Secretary to the Commission.
• The Sixteenth Finance Commission shall make recommendations as to the following matters, namely.
• The distribution between the Union and the States of the net proceeds of taxes which are to be, or may be, divided between them under Chapter I, Part XII of the Constitution and the allocation between the States of the respective shares of such proceeds;
• The principles which should govern the grants-in-aid of the revenues of the States out of the Consolidated Fund of India and the sums to be paid to the States by way of grants-in-aid of their revenues under article 275 of the Constitution for the purposes other than those specified in the provisos to clause (1) of that article; and
• The 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
• The Sixteenth Finance Commission may review the present arrangements on financing Disaster Management initiatives, with reference to the funds constituted under the Disaster Management Act, 2005 (53 of 2005), and make appropriate recommendations thereon.
• The Sixteenth Finance Commission has been requested to make its report available by 31 day of October, 2025 covering a period of five years commencing on the 1 day of April, 2026.
• Composition: Chairman + 4 other members.
• Qualification: Determined by Parliament.
• Parliament has specified:
• Chairman: should be a person having experience in public affairs.
• Judge of HC or one qualified to be appointed as one.
• Person having specialized knowledge of finance & accounts of the government.
• Person who has experience in financial matters & administration.
• Person who has special knowledge of economics.
• Tenure:
• Constituted by the president of India every fifth year or at such earlier time as he considers necessary.
• Hold office for such a period as specified by the president in his order.
• Eligible for reappointment.
• Other Aspects:
• Recommendations of FC are advisory in nature.
• Balancing wheel of fiscal federalism.
• FC is a quasi-judicial
• The Commission submits its report to the President. He lays it before both the Houses of Parliament.