The Finance Commission
A body the President sets up every five years to decide how tax money is shared between the Centre and the states.
What the paper can ask
- Constituted every fifth year or earlier; recommends vertical and horizontal tax devolution and grants-in-aid.
- The 16th Finance Commission has a chairman and four members, including T. Rabi Sankar, Annie George Mathew, Manoj Panda and Soumya Kanti Ghosh. (as of 23 Oct 2026)
- The 15th Finance Commission's recommendations ran to 31 March 2026.
- Its recommendations are advisory; the Union government lays them before Parliament with an action-taken report.
Why exams ask
The Article, the first chairman, the current chairman and the share of taxes devolved are the usual questions.
The full story
The Finance Commission is a constitutional body the President constitutes every fifth year (or earlier). It recommends how the net proceeds of shared taxes are divided between the Union and the states, how they are split among states, the principles for grants-in-aid to states under Article 275, and measures to fund panchayats and municipalities. It has a chairman and four members.
Test yourself
1.The Fifteenth Finance Commission recommended that what share of the divisible pool of central taxes be devolved to the States for 2021-26?
Correct. The 15th FC (chair N. K. Singh) kept vertical devolution at 41%, one point below the 14th FC's 42%, adjusting for Jammu and Kashmir becoming Union Territories.
Not quite. The 15th FC (chair N. K. Singh) kept vertical devolution at 41%, one point below the 14th FC's 42%, adjusting for Jammu and Kashmir becoming Union Territories. It goes into your error book.
2.Who chaired the Sixteenth Finance Commission, whose report covers the award period 2026-27 to 2030-31?
Correct. The 16th Finance Commission under Dr Arvind Panagariya submitted its report to the President for the five years beginning 1 April 2026.
Not quite. The 16th Finance Commission under Dr Arvind Panagariya submitted its report to the President for the five years beginning 1 April 2026. It goes into your error book.
3.Under which Article is the Finance Commission constituted?
Correct. Article 280 requires the President to constitute a Finance Commission every fifth year or earlier.
Not quite. Article 280 requires the President to constitute a Finance Commission every fifth year or earlier. It goes into your error book.