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The article would help the reader to understand the role, powers and functions of the Finance Commission in India.

Finance Commission of India

The Finance Commission of India came into existence in 1951. The Finance commission is established under article 280 of the Indian Constitution of India by the President of India. The Indian Finance Commission Act was passed to give a structured format to the Finance Commission of India as per the world standard. The need for the Finance Commission was felt by the British for guiding the finance of India. The structure of the modern Act was laid in the early 1920's. The Finance Commission is formed to define the financial relations between the centre and the state. The Finance Commission Act of 1951 tells about the qualification, appointment, term, eligibility, disqualification, powers etc of the Finance Commission.

Functions Of The Finance Commission
The Finance Commission's duty is to recommend to the President as to-
  • The distribution of net proceeds of taxes between the Union and the States.
  • To evaluate the increase in the Consolidated Fund of a state to affix the resources of the Panchayat in the state.
  • To evaluate the increase in the Consolidated Fund of a state to affix the resources of the Municipalities in the state.
Implementation Of The Recommendation Of Finance Commission

The recommendation of the Finance Commission are implemented
  • By an order of the President or by executive orders.
Powers of the Commission:

The Finance Commission has the following powers:
  • The Commission shall have all the powers of the Civil Court as per the Code of Civil Procedure, 1908.
  • It can call any witness, or can ask for the production of any public record or document from any court or office.
  • It can ask any person to give information or document on matters as it may feel to be useful or relevant.
  • It can function as a civil court in discharging its duties.
Qualifications for appointment and the manner of selection:
The Chairman of the Finance Commission is selected among persons who have had the experience of public affairs, and four other members are selected among persons who
  • Are, or have been, or are qualified as judges of High Court, or
  • Have knowledge of finance, or
  • Have vast experience in financial matters and are in administration, or
  • Have knowledge of economics
Term of Office of the members:
Every member of the commission shall be in the office as specified by the President. He can also be reappointed, provided that he has already addressed a letter to the President for his resignation.

Conditions of service and salaries and allowance of members:
  • Each member should provide whole time or part time service to the Commission as the President with respect to each case might specify.
  • Each member shall receive salaries according to the provisions made by the central government.

A member may be disqualified if:
  • He is of unsound mind.
  • He is involved in a vile act.
  • If his interests are likely to affect the smooth functioning of the Commission.

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