Which of the following statements about the Finance Commission of India is correct?

Correct — C. The Finance Commission recommends, and the government decides.

Under Article 280(3) its duty is to make recommendations to the President, chiefly on dividing tax proceeds between the Union and the States and on grants-in-aid.

Article 281 then has the President lay every recommendation before each House of Parliament with an explanatory memorandum on the action taken. The memorandum reports what the government decided to do with the advice.

Advisory, not legally binding → option (c).

Why the others are wrong

• (a)
  Its recommendations are binding on the Union and State governments. — Nothing in Articles 280 or 281 makes the advice binding. The Commission recommends to the President, and the government reports what action it took on each recommendation.
• (b)
  Its members enjoy a fixed tenure protected from executive removal. — The Constitution gives members no fixed term and no removal safeguard. Under the 1951 Act a member holds office for the period set in the President's order, unlike a Supreme Court judge's protected tenure.
• (d)
  It submits its report directly to the Parliament for enactment. — The report goes to the President, not to Parliament. Parliament receives it only when the President lays it with an action-taken memorandum, and Parliament does not enact the report.

The Finance Commission is a constitutional body under Article 280. The President constitutes it every fifth year, or earlier if the President considers it necessary, with a chairman and four other members.

It recommends how the net proceeds of shareable taxes are divided between the Union and the States, and how the States' share is allocated among them. It also recommends the principles for grants-in-aid to States from the Consolidated Fund of India.

Parliament sets members' qualifications by law, in the Finance Commission (Miscellaneous Provisions) Act, 1951.

Key facts

• Article 280: the President constitutes a Finance Commission every fifth year or earlier, with a chairman and four other members.
• Article 281: every recommendation is laid before each House of Parliament with an explanatory memorandum on the action taken.
• The first Finance Commission was set up in 1951, chaired by K. C. Neogy.
• The 16th Finance Commission, chaired by Arvind Panagariya, was constituted on 31 December 2023 for the award period 2026-31.

Common traps

• Treating the tabling of the report in Parliament under Article 281 as parliamentary approval: Parliament receives it, it does not enact it.
• Giving Finance Commission members the protected tenure of the CAG or a Supreme Court judge: their period of office is set by the President's order.

No directly related past PYQ was found.