Finance Commission is a constitutional body set up under article 280 of the constitution. Finance Commission is set up every five years or earlier if required by the president of India, firstly it was set up in 1951. The function of the finance commission is to give the recommendations to the president of India regarding the devolution of funds from central government to states and also about what portion of funds to be allocated to which state. A finance commission just gives recommendations based on various parameters, the central government is not bound to follow the recommendations made. As per the code of civil procedure 1908, the finance commission has all powers of a civil court.

The president of India has set up the 15th Finance Commission under the chairmanship of N.K. Singh, former Revenue and Expenditure Secretary and Rajya Sabha MP. The 15th Finance Commission will use 2011 census data for the first time for fund allocation, while till now 1971 census data was in use. As recommendations of a finance commission are implemented for a tenure of five years, the recommendation of this commission will be implemented from April 1, 2020.

If we take a look at recommendations of 14th Finance Commission, which was headed by former RBI Governor Y V Reddy, it had made recommendations for 42 per cent of tax devolution from centre to the states for the five-year interval from 2015-16 to 2019-20.

Members of 15th Finance Commission

As per the constitution, a finance commission should have a chairman and four members. The members of 15th finance commission which will submit its report till October 30, 2019, are shown in the figure below.

Terms of Reference Issue

The term of reference of 15th Finance Commission includes the use of 2011 census data for the allocation of funds to states, while some southern states have opposed it as this will lead to fewer funds for them. These opposing states have shown improvement in some parameters in the last few decades, like fertility rate, controlling population etc. To address the issues of states, N K Singh (Chairman of finance commission) has set up a panel headed by Arvind Virmani to assist it on the issue.

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