Actual Article
Article 280: Finance Commission
- The President shall, within two years from the commencement of this Constitution and thereafter at the expiration of every fifth year or at such earlier time as the President considers necessary, by order constitute a Finance Commission which shall consist of a Chairman and four other members to be appointed by the President, and shall have the following duties:
- (a) to make recommendations to the President as to the distribution between the Union and the States of the net proceeds of taxes which are to be, or may be, divided between them under this Chapter and the allocation between the States of the respective shares of such proceeds;
- (b) to make recommendations to the President as to the principles which should govern the grants-in-aid of the revenues of the States out of the Consolidated Fund of India;
- (c) to make recommendations to the President as to the measures needed to augment the Consolidated Fund of a State to supplement the resources of the Panchayats and Municipalities in the State on the basis of the recommendations made by the Finance Commission of the State;
- (d) any other matter referred to the Commission by the President in the interests of sound finance.
- The Commission shall determine their procedure and shall have such powers in the performance of their functions as Parliament may by law confer on them.
UPSC Notes for Article 280
Explanation:
- Constitution of Finance Commission: The President constitutes a Finance Commission every five years or earlier if necessary. The Commission comprises a Chairman and four other members appointed by the President.
- Duties of the Finance Commission:
- Distribution of Tax Proceeds: Recommending the distribution of the net proceeds of taxes between the Union and the States, and among the States.
- Grants-in-Aid Principles: Recommending principles for grants-in-aid to States from the Consolidated Fund of India.
- Augmenting Local Bodies’ Resources: Recommending measures to augment the Consolidated Fund of States to supplement the resources of Panchayats and Municipalities based on the State Finance Commission’s recommendations.
- Other Matters: Addressing any other matters referred to it by the President in the interests of sound finance.
Key Points:
- Fiscal Federalism: The Finance Commission plays a crucial role in promoting fiscal federalism by ensuring a fair distribution of financial resources between the Union and the States.
- Resource Allocation: The Commission’s recommendations help in equitable allocation of tax revenues and grants, supporting balanced regional development.
- Local Bodies Support: By recommending measures to augment local bodies’ resources, the Commission strengthens grassroots-level governance and development.
Important Cases and Commissions Related to Article 280
Cases:
- No specific landmark cases directly interpreting Article 280, as it primarily deals with the procedural and advisory functions of the Finance Commission.
Commissions:
- Finance Commissions (First to Fifteenth): Each Finance Commission has made significant contributions to fiscal federalism and resource distribution in India, following the principles laid out in Article 280.
- N.K. Singh Commission (Fifteenth Finance Commission): Provided detailed recommendations on revenue distribution, grants-in-aid, and measures to augment local body resources.
Important Reports Related to Article 280:
- Finance Commission Reports: Each report provides analysis and recommendations on the distribution of tax revenues, grants-in-aid, and measures to support local bodies.
- Reports on Fiscal Federalism: Discuss the impact of Finance Commission recommendations on fiscal relations between the Union and the States.
Previous Year Prelims Questions Related to Article 280
- (UPSC Prelims 2016) What is the primary role of the Finance Commission constituted under Article 280 of the Indian Constitution?
- A. To regulate trade and commerce
- B. To distribute tax revenues between the Union and States
- C. To manage the foreign exchange reserves
- D. To conduct elections Correct Answer: B. To distribute tax revenues between the Union and States
- (UPSC Prelims 2018) How often is the Finance Commission constituted under Article 280?
- A. Every three years
- B. Every five years
- C. Every ten years
- D. Every two years Correct Answer: B. Every five years
Previous Year Mains Questions Related to Article 280
- Mains 2016: “Discuss the significance of the Finance Commission in promoting fiscal federalism in India. How do the recommendations of the Finance Commission impact the financial relations between the Union and the States?”
- Mains 2019: “Evaluate the role of the Finance Commission in ensuring equitable resource distribution among States. What are the challenges faced by the Finance Commission in fulfilling its mandate under Article 280?”
Additional Insights:
- Ensuring Fair Distribution: Article 280 ensures that the Finance Commission plays a pivotal role in the fair distribution of financial resources, addressing regional disparities and promoting balanced development.
- Strengthening Local Governance: By recommending measures to augment local body resources, the Finance Commission supports decentralization and strengthens local governance structures.
Understanding Article 280 is crucial for UPSC aspirants as it provides insights into the mechanisms for distributing financial resources between the Union and the States, emphasizing the importance of fiscal federalism and equitable resource allocation. This knowledge is essential for both preliminary and main examinations, offering a comprehensive understanding of the financial provisions and advisory functions within the Indian Constitution.