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Finance Commission

Finance Commission of India - Constitutional provisions, structure, functions, fiscal distribution, 15th Finance Commission and important notes for TNPSC exams.

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💰 Finance Commission - Finance Commission

Constitutional framework for central-state fund sharing

📊 Finance Commission Overview - SVG
💰 Finance Commission 📜 Constitutional provision Article 280 Constitutional Body - Constitutional body Finance Commission Finance Commission 5 Members 📅 First Finance Commission 1951 Chairman: K.C. Niyogi 📅 Current (16th FC) 2024-2029 Chairman: Arvind Panagariya 👤 Appointment President of the Republic ⏰ Tenure 5 Years (Every 5 Years) 🎯 Main task - Fund sharing Distribution of central government tax revenue to states Vertical Division (Central-State) + Horizontal Division (Inter-State) 👥 Organization – 5 Members (1 Chairman + 4 Members) Chairman: 1 Members: 4 Qualification: Parliament decides Appointment: President | Recommendation: PM + Cabinet
📌 Basic information
Constitution Article 280
Type Constitutional Body
appointment President of the Republic
member 1 Chairman + 4 Members
Tenure 5 years
Report To the President
📜 Major Finance Commissions
1st FC K.C. Niyogi 1951
14th FC Y.V. Ready 2015-20
15th FC N.K. Singh 2020-26
16th FC Arvind Panagariya 2026-31

⚙️ Functions of Finance Commission (Article 280)

📊 Functions & Distribution - SVG
⚙️ Functions of Finance Commission (Article 280) 1️⃣ Tax revenue sharing • Distribution of central taxes to states • Vertical Division: Center vs States • 15th FC: 41% for States 2️⃣ Recommendation of Grants • Grants-in-Aid to States (Art. 275) • Revenue Deficit Grants • Special Grants for specific purposes 3️⃣ Local Government Fund (73rd & 74th) • Funding of Panchayats & Municipalities • Based on recommendation of State Finance Commission • Addition after 73rd/74th Amendment (1992). 4️⃣ Other matters • Matters mentioned by the President • Disaster Management Funds • Performance Based Incentives 📊 Tax Distribution Method Vertical Division Center vs States Center 59% : States 41% Horizontal Division Apportionment between States Population, Area, Income etc. 📋 15th FC - Horizontal Distribution Criteria Population 15% Area 15% Forest & Ecology 10% Income Distance 45% Demographic 12.5% Tax Effort 2.5%
📊 15th FC vs 14th FC - Comparison
feature 14th FC (Y.V. Reddy) 15th FC (N.K. Singh)
Period 2015-2020 2020-2026
States share 42% 41%
Population 17.5% (1971) 15% (2011)
Income Distance 50% 45%
Demographic 10% 12.5%
Forest 7.5% 10%

📋 All Finance Commissions (1st to 16th)

📊 All Finance Commissions - SVG Timeline
📋 Finance Commissions Timeline (1st - 16th) 1 K.C. Niyogi 1951 2 K. Santhanam 1956 3 A.K. subscription 1961 4 P.V. Rajamannar 1964 5 Mahavir martyr 1969 6 K. Brahmananda 1973 7 J.M. Shellad 1978 8 Y.B. Chavan 1983 9 N.K.P. Salve 1987 10 K.C. Pant 1992 11 A.M. Cave 1998 12 C. Rangarajan 2004 13 Vijay Kelkar 2009 14 Y.V. Ready 2015-20 15 N.K. Singh 2020-26 16 Panagariya 2026-31 🎯 Important: 1st (K.C. Neogi), 14th (42%), 15th (41%), 16th (Current) Large share of Tamil Nadu: High share of low income states in Income Distance Criteria
📊 All Financial Commissions - Full List
FC Chairman Period State share
1st K.C. Neogi 1952-57 -
2nd K. Santhanam 1957-62 -
3rd A.K. subscription 1962-66 -
4th P.V. Rajamannar 1966-69 -
5th Mahavir martyr 1969-74 -
6th K. Brahmananda Reddy 1974-79 -
7th J.M. Shellad 1979-84 -
8th Y.B. Chavan 1984-89 -
9th N.K.P. Salve 1989-95 -
10th K.C. Pant 1995-2000 29.5%
11th A.M. Cave 2000-05 29.5%
12th C. Rangarajan 2005-10 30.5%
13th Vijay Kelkar 2010-15 32%
14th Y.V. Ready 2015-20 42%
15th N.K. Singh 2020-26 41%
16th Arvind Panagariya 2026-31 TBD

🎯 Finance Commission - Shortcuts & Memory Tricks

🧠 Quick Memory SVG
🎯 Finance Commission - MEMORY TRICKS 📜 ARTICLE TRICK 280 = FC 2 + 8 + 0 = 10 10 x 28 = 280 "28 Zero = Finance" 👤 1st FC TRICK K.C. Neogi "KC = Kick-start Commission" 1st FC Kick Started 1951-52 (Free India 1st) 💰 SHARE TRICK 14th = 42% | 15th = 41% "14 x 3 = 42" "15 behind = 41" (1 less) 14th First Big Jump! ⏰ TENURE TRICK 5 Years = 5 Members "5 = 5" Easy Formula Chair + 4 = 5 Total 📊 15th FC CRITERIA 45% = Income Distance "45 = ID" (Income Distance) Biggest Weight 45% 🆕 16th FC (CURRENT) Arvind Panagariya "Pan = Pan-India FC" 2026-31 Period 🎯 ONE-LINER: "280-KC-5-5-42-41-Pan" = Article-1st Chair-Years-Members-14th%-15th%-16th Chair Finance Commission | Article 280 | 5 years 5 Member | State share recommended
📝 Quick One-Liners
Finance Commission Article Article 280
1st FC Chairman K.C. Neogi (1951)
16th FC Chairman Arvind Panagariya (2026-31)
Tenure 5 Years
Members 1 Chairman + 4 Members = 5
14th FC State Share 42% (Y.V. Reddy)
15th FC State Share 41% (N.K. Singh)
appointment President of the Republic
Main Function Central-State Tax Sharing
Biggest Criteria (15th FC) Income Distance - 45%
❓ Frequently Asked Questions
Q1: Finance Commission is under which Article?
A: Article 280
Q2: Who is the 1st Finance Commission Chairman?
A: K.C. Neogi
Q3: Who is the 16th Finance Commission Chairman?
A: Arvind Panagariya
Q4: What is the state's share in 14th FC?
A: 42%
Q5: What is the biggest criteria of 15th FC?
A: Income Distance - 45%
Q6: Who appoints the Finance Commission?
A: The President
Previous Topic Reserve Bank of India
Next Topic Centre-State Financial Relations

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