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Governance & Society Cluster482 Verified Questions
Finance Commission of India GK Questions & Answers
The Finance Commission of India is a constitutional quasi-judicial body constituted every five years by the President of India under Article 280 of the Constitution. Established to correct vertical fiscal imbalances between the Union and the States and horizontal imbalances among the States, the Commission makes formal recommendations regarding the distribution of net proceeds of divisible taxes under Chapter I of Part XII. In accordance with the Finance Commission (Miscellaneous Provisions) Act, 1951, the body consists of a Chairman and four other members possessing specialized expertise in public affairs, economics, finance, and judicial administration.
The Commission formulates principles governing grants-in-aid to state revenues under Article 275 from the Consolidated Fund of India and recommends measures to augment the Consolidated Fund of a State to supplement local panchayat and municipal finances under Article 280(3)(bb) and (c). The 15th Finance Commission, chaired by N.K. Singh, established a vertical devolution share of 41 percent for States (adjusting 1 percent for the Union Territories of Jammu & Kashmir and Ladakh) and incorporated horizontal criteria including income distance, demographic performance based on 2011 census data, forest cover, and tax effort.
High-yield conceptual summaries for competitive exams and rapid revision.
Constitutional body established under Article 280, constituted every five years by the President of India.
Composed of a Chairman and four members whose qualifications are governed by the Finance Commission Act, 1951.
Recommends vertical tax sharing between Centre and States and horizontal allocation formulas among States under Article 270.
Formulates principles for statutory grants-in-aid to States from the Consolidated Fund of India under Article 275.
The 15th Finance Commission (chaired by N.K. Singh) recommended a 41% vertical devolution share for States for 2021–2026.
Showing 25 Curated Questions482 Total in Bank
1ID: GK-TAX-00031
easyFinance Commission & Tax Devolution Formula
Who was appointed as the Chairman of the First Finance Commission of India constituted in 1951?
Verified Explanation
The First Finance Commission was established in 1951 by the President under the chairmanship of Shri K. C. Neogy. It submitted its report in 1952, laying down the initial principles of vertical and horizontal revenue sharing in independent India.
2ID: GK-TAX-00032
easyFinance Commission & Tax Devolution Formula
Under which Article of the Constitution must the President cause every recommendation made by the Finance Commission to be laid before each House of Parliament?
Verified Explanation
Article 281 of the Constitution mandates that the President shall cause every recommendation made by the Finance Commission under the provisions of Chapter I of Part XII together with an explanatory memorandum as to the action taken thereon to be laid before each House of Parliament.
3ID: GK-TAX-00033
easyFinance Commission & Tax Devolution Formula
Who was appointed as the Chairman of the 16th Finance Commission constituted by the Government of India in December 2023?
Verified Explanation
In December 2023, the Government of India notified the constitution of the 16th Finance Commission under the chairmanship of Dr. Arvind Panagariya (former Vice-Chairman of NITI Aayog) to recommend tax devolution and grant principles for the five-year period starting April 1, 2026.
4ID: GK-TAX-00034
easyFinance Commission & Tax Devolution Formula
Which Article of the Indian Constitution provides for statutory Grants-in-Aid of revenues to specific States in need of assistance as recommended by the Finance Commission?
Verified Explanation
Article 275 of the Constitution provides for statutory Grants-in-Aid from the Consolidated Fund of India to such States as Parliament may determine to be in need of assistance, primarily based on the recommendations of the Finance Commission (such as Revenue Deficit Grants).
5ID: GK-TAX-00035
easyFinance Commission & Tax Devolution Formula
What vertical tax devolution share to States was recommended by the 15th Finance Commission for the 2021-26 period, adjusted from 42% to account for the newly created Union Territories of J&K and Ladakh?
Verified Explanation
The 15th Finance Commission retained the vertical devolution share at 41% of the divisible pool of central taxes (a 1% reduction from the 14th Finance Commission's 42%), with the 1% adjustment made to provide for the budgetary requirements of the newly created Union Territories of Jammu & Kashmir and Ladakh from the Centre's resources.
6ID: GK-TAX-00037
easyFinance Commission & Tax Devolution Formula
To incentivize population control efforts while using 2011 Census data, what new criterion with a 12.5% weightage was introduced by the 15th Finance Commission?
Verified Explanation
The 15th Finance Commission used the 2011 Census data for population (15% weight) and introduced the 'Demographic Performance' criterion with a 12.5% weight to reward states that successfully reduced their Total Fertility Rate (TFR) over past decades.
7ID: GK-TAX-00038
mediumFinance Commission & Tax Devolution Formula
What weightage was allocated to 'Forest and Ecology' in the horizontal tax devolution formula of the 15th Finance Commission?
Verified Explanation
The 15th Finance Commission assigned a 10.0% weightage to 'Forest and Ecology' (calculated based on dense and moderately dense forest cover in each state) to compensate states for the ecological services they render and the economic costs of maintaining forest areas.
8ID: GK-TAX-00040
mediumFinance Commission & Tax Devolution Formula
Under which Article of the Constitution is the Governor of a State required to constitute a State Finance Commission (SFC) every five years to review the financial position of Panchayats?
Verified Explanation
Article 243I (inserted by the 73rd Amendment) mandates the Governor of each State to constitute a State Finance Commission every five years to review the financial position of Panchayats and recommend principles of tax assignment and grant-in-aid.
9ID: GK-TAX-00041
mediumFinance Commission & Tax Devolution Formula
Who chaired the 13th Finance Commission of India (2010–2015), which first designed a comprehensive roadmap for GST implementation and recommended 32% vertical devolution?
Verified Explanation
The 13th Finance Commission was headed by Dr. Vijay L. Kelkar. Its report provided a detailed design for the Goods and Services Tax, a GST compensation package of ₹50,000 crore, and raised the states' share in Union taxes to 32%.
10ID: GK-TAX-00042
mediumFinance Commission & Tax Devolution Formula
The Debt Consolidation and Relief Facility (DCRF), which incentivized states to enact their own fiscal responsibility laws, was recommended by which Finance Commission?
Verified Explanation
The 12th Finance Commission chaired by Dr. C. Rangarajan introduced the Debt Consolidation and Relief Facility (DCRF), which linked debt write-offs and interest rate reductions for state loans to the enactment of state-level FRBM legislation.
11ID: GK-TAX-00044
hardFinance Commission & Tax Devolution Formula
What weightage was allocated to 'Tax and Fiscal Efforts' in the horizontal devolution formula of the 15th Finance Commission?
Verified Explanation
The 15th Finance Commission assigned a 2.5% weightage to 'Tax and Fiscal Efforts' to reward states showing higher tax mobilization efficiency relative to their own gross state domestic product (GSDP) capacity.
12ID: GK-TAX-00045
hardFinance Commission & Tax Devolution Formula
For financing State Disaster Risk Management Funds (SDRMF) recommended by the 15th Finance Commission, what is the cost-sharing pattern between Centre and General Category States?
Verified Explanation
Under the 15th Finance Commission recommendations, the annual allocation for State Disaster Risk Management Funds (SDRMF) is contributed in a 75:25 ratio between the Centre and General Category States, and in a 90:10 ratio for North-Eastern and Himalayan States.
13ID: GK-TAX-00046
hardFinance Commission & Tax Devolution Formula
What dedicated non-lapsable fund was recommended by the 15th Finance Commission to bridge funding gaps in national defense and internal security modernization?
Verified Explanation
The 15th Finance Commission recommended the creation of a dedicated, non-lapsable 'Modernisation Fund for Defense and Internal Security' (MFDIS) with an indicative corpus of ₹2.38 lakh crore over 2021-26, funded partially through the Consolidated Fund of India and monetization of defense lands.
14ID: GK-TAX-00047
hardFinance Commission & Tax Devolution Formula
According to the Finance Commission (Miscellaneous Provisions) Act, 1951, which qualification is NOT prescribed for the members of the Finance Commission?
Verified Explanation
Under Section 3 of the Finance Commission (Miscellaneous Provisions) Act, 1951, the four members must be selected from persons who: (a) are/have been judges of a High Court, (b) have special knowledge of government finance/accounts, (c) have wide experience in financial matters/administration, or (d) have special knowledge of economics. Serving as RBI Governor is not a statutory requirement.
15ID: GK-TAX-00048
hardFinance Commission & Tax Devolution Formula
What proportion of rural local body grants recommended by the 15th Finance Commission was earmarked as 'Tied Grants' for drinking water, sanitation, and ODF maintenance?
Verified Explanation
The 15th Finance Commission recommended that 60% of the grants to Panchayati Raj Institutions (PRIs) be 'tied' specifically to basic services like supply of drinking water, rainwater harvesting, water recycling, and sanitation maintenance, while 40% remained untied.
16ID: GK-TAX-00050
hardFinance Commission & Tax Devolution Formula
Which Constitutional Amendments inserted sub-clauses (bb) and (c) into Article 280(3), mandating the Central Finance Commission to recommend measures to augment the Consolidated Fund of States for local bodies?
Verified Explanation
The 73rd and 74th Constitutional Amendment Acts, 1992 inserted sub-clauses (bb) and (c) into Article 280(3), requiring the Finance Commission to recommend measures to augment the State Consolidated Fund to supplement the resources of Panchayats and Municipalities on the basis of State Finance Commission recommendations.
17ID: GK-TAX-00091
easyFinance Commission & Tax Devolution Formula
Who served as the Chairman of the Tenth Finance Commission (1995–2000), which first recommended the revolutionary 'Alternative Scheme of Devolution' to share all central taxes with States?
Verified Explanation
K. C. Pant chaired the Tenth Finance Commission, which submitted its report in 1994 recommending an Alternative Scheme of Devolution. This scheme proposed pooling gross tax revenues of the Union (rather than just income tax and union excise duties) for vertical sharing with States, later codified into law by the 80th Constitutional Amendment Act, 2000.
18ID: GK-TAX-00093
easyFinance Commission & Tax Devolution Formula
In the horizontal tax devolution formula recommended by the 15th Finance Commission for the 2021–26 period, what weightage was allocated to the 'Area' criterion?
Verified Explanation
The 15th Finance Commission allocated a 15.0% weightage to geographical 'Area' in its horizontal tax devolution formula to compensate larger States for the higher administrative and infrastructure delivery costs associated with expansive terrains.
19ID: GK-TAX-00094
easyFinance Commission & Tax Devolution Formula
What weightage was assigned to 'Population (2011 Census)' in the 15th Finance Commission's horizontal tax devolution formula for the period 2021–26?
Verified Explanation
The 15th Finance Commission assigned a 15.0% weightage to Population based entirely on the 2011 Census data. To address concerns of States that successfully achieved population stabilization, the Commission additionally introduced a 12.5% weightage for Demographic Performance.
20ID: GK-TAX-00097
mediumFinance Commission & Tax Devolution Formula
Which Article of the Constitution of India mandates the State Finance Commission (SFC) to review the financial position of Municipalities (Urban Local Bodies) and recommend tax devolution?
Verified Explanation
While Article 243I governs the constitution and functions of the State Finance Commission with respect to Panchayats, Article 243Y mandates that the Finance Commission constituted under Article 243I shall also review the financial position of Municipalities and recommend revenue-sharing principles.
21ID: GK-TAX-00098
mediumFinance Commission & Tax Devolution Formula
Who chaired the Twelfth Finance Commission of India (2005–2010), which recommended increasing vertical tax devolution to 30.5% and introduced the Debt Consolidation and Relief Facility (DCRF)?
Verified Explanation
Dr. C. Rangarajan (former Governor of the Reserve Bank of India) chaired the Twelfth Finance Commission. His commission recommended a vertical share of 30.5% for States and designed the DCRF framework, tying debt write-offs and interest rate relief for States to the enactment of State-level Fiscal Responsibility legislations.
22ID: GK-TAX-00099
hardFinance Commission & Tax Devolution Formula
Who served as the Chairman of the Eleventh Finance Commission of India (2000–2005), which created the 'Incentive Fund' to reward States achieving revenue deficit reduction?
Verified Explanation
Prof. A. M. Khusro was the Chairman of the Eleventh Finance Commission. The commission recommended vertical devolution of 29.5% (with an additional 0.5% earmarked for an Incentive Fund) to encourage fiscal consolidation and structural budget reforms among State Governments.
23ID: GK-TAX-00100
hardFinance Commission & Tax Devolution Formula
Who was appointed as the Secretary to the 16th Finance Commission of India, constituted in December 2023 under the chairmanship of Dr. Arvind Panagariya?
Verified Explanation
In December 2023, the Government of India appointed senior IAS officer Ritvik Ranjanam Pandey as the Secretary to the 16th Finance Commission. The Commission, headed by Dr. Arvind Panagariya, includes members Ajay Narayan Jha, Annie George Mathew, Dr. Niranjan Rajadhyaksha, and Dr. Soumya Kanti Ghosh.
24ID: GK-TAX-00101
hardFinance Commission & Tax Devolution Formula
According to its Terms of Reference (ToR), for which five-year award period will the 16th Finance Commission make its recommendations on tax devolution and grants-in-aid?
Verified Explanation
The 16th Finance Commission is mandated to submit its comprehensive report by October 31, 2025, covering the five-year award period from April 1, 2026 to March 31, 2031, following the conclusion of the 15th Finance Commission's award cycle.
25ID: GK-TAX-00102
easyFinance Commission & Tax Devolution Formula
Who served as the Chairman of the Ninth Finance Commission of India (1987–1990), which pioneered the 'normative approach' to assessing State revenues and expenditures?
Verified Explanation
N. K. P. Salve was appointed Chairman of the Ninth Finance Commission in June 1987. The Ninth Commission was notable for adopting a normative approach to evaluate the revenue capacity and expenditure commitments of both the Union and the States.