Must Know Facts For IAS Aspirant About Finance Commission Of India
Post on 09,December 2015   4:00 AM
By - PolyEyes Staff
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What Does Finance Commission Do : Finance commission (FC) every five years to record how returns from central taxes should be shared between centre and states. 

FC deals only with the revenue collected through taxes by centre- corporation tax, income tax, customs, excise and service tax. 

How Does FC Divide Resource Between States: The formula used by the latest FC takes into consideration population, demographic changes, area, a state’s per capita income and its share in forest cover. 

  • The base year is taken as 1971.
  • Critical factor in determining the state share is “INCOME DISTANCE” 

INCOME DISTANCE: it is the measure of how far the state’s per capita gross state domestic product (GSDP) is from top state, the higher will be the share of central taxes. 

Legal Status of Finance Commission: FC is appointed by president of India under the article of 280 of the constitution. It has five members including a chairperson. Its recommendations are implemented for five years.

The recommendations of union taxes and duties distributions are implemented by the order of president while other orders (recommendations) like shaning of petradium profit, debt relief, mode of central assistance, etc. are implemented by executive orders.


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