Polity
Finance Commission of India: Article 280
The Finance Commission is a constitutional body under Article 280, appointed by the President every five years. It recommends how the net proceeds of taxes should be shared between the Union and the States (vertical devolution) and among the States (horizontal devolution), and the principles for grants-in-aid.
Last reviewed 2026-10-15
Key facts
- Consists of a chairman and four other members.
- Recommendations are advisory, and the Union Government lays them before Parliament with an action-taken report.
- The first Finance Commission (1951) was chaired by K. C. Neogy.
- The 15th Finance Commission, chaired by N. K. Singh, recommended a 41 per cent share of the divisible pool for the States for 2021-26.
- The 16th Finance Commission, chaired by Arvind Panagariya, was constituted in December 2023 for the 2026-27 to 2030-31 period.
Functions
- Distribution of tax proceeds between the Centre and States, and among the States.
- Grants-in-aid to States under Article 275.
- Measures to supplement the resources of panchayats and municipalities on the basis of State Finance Commission recommendations.
- Any other matter referred by the President.
Frequently asked questions
How often is the Finance Commission constituted?
Every five years, or earlier if the President considers it necessary.
Which article creates the Finance Commission?
Article 280.
Are Finance Commission recommendations binding?
No, they are advisory.