Discussion
The Finance Commission of India is constituted every
Answer: A
Correct answer: Five years
Article 280 requires the President to constitute a Finance Commission every five years, or earlier if considered necessary. Its task is to recommend how the net proceeds of taxes should be divided between the Union and the states, and how the states’ share should be distributed among them; the principles governing grants-in-aid from the Consolidated Fund; and measures to augment the resources of panchayats and municipalities. It has a chairman and four other members, appointed by the President. Its recommendations are advisory, but by long convention on the vertical and horizontal division of taxes they are accepted. It is the principal instrument of fiscal federalism, and its importance grew after the Planning Commission - which had allocated plan funds separately - was replaced by NITI Aayog in 2015, leaving the Finance Commission as the main channel of transfers. It should not be confused with the Finance Ministry, or with the annual Union Budget under Article 112.
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