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Union Finance Commission | Kerala PSC LDC
- Fact 1 of 8🏛️
Finance Commission is set up under Article 280
The President constitutes the Union Finance Commission under Article 280 of the Constitution, first within two years of the Constitution's commencement and thereafter at the expiry of every fifth year or earlier if needed.
- Fact 2 of 8👥
Chairman and four members
Article 280 provides for a Finance Commission of a Chairman and four other members, appointed by the President. Parliament prescribes their qualifications and the manner of their selection.
- Fact 3 of 8📜
First Finance Commission was in 1951
The first Union Finance Commission was constituted in 1951 under the chairmanship of K.C. Neogy. It was set up as the Constitution required and has been constituted periodically since.
- Fact 4 of 8⚖️
Dividing the tax pie
Article 280(3)(a) requires the Commission to recommend how the net proceeds of central taxes are divided between the Union and the States, and among the States themselves. This is a key exam topic.
- Fact 5 of 8🏘️
Support for panchayats and municipalities
Under Article 280(3)(bb), added through the 73rd and 74th Amendments, the Finance Commission recommends measures to augment a State's Consolidated Fund for panchayats and municipalities.
- Fact 6 of 8📊
States got 42% in the 14th Commission
The 14th Finance Commission, chaired by Y.V. Reddy, recommended that States receive 42 per cent of the divisible pool of central taxes. This was the highest share recommended up to that time.
- Fact 7 of 8📑
Recommendations are laid before Parliament
Under Article 281, the Finance Commission's recommendations, with an explanatory memorandum on action taken, must be laid before each House of Parliament. The Union government is not legally bound to accept them.
- Fact 8 of 8🔍
Union and State Finance Commissions differ
The Union Finance Commission is provided for under Article 280, while State Finance Commissions, which review local body finances, are provided for under Article 243I. Kerala's State Finance Commission follows this scheme.
