The primary duty of the Finance Commission of India is
- (a)To give the recommendations on distribution of tax revenue between the Union and States
- (b)To prepare the Union Annual Budget
- (c)To advise the President on financial matters
- (d)To allocate funds to various Ministries/Departments of the Union and State Governments
Correct — A, to give recommendations on the distribution of tax revenue between the Union and the States. The Finance Commission is a constitutional body under Article 280, appointed by the President every fifth year. Its core mandate is to recommend how the net proceeds of shareable central taxes are divided between the Centre and the States (vertical devolution) and among the States themselves (horizontal distribution), together with the principles governing grants-in-aid to the States. That revenue-sharing role is exactly what option (a) states.
- (b)To prepare the Union Annual Budget — The Union Budget is prepared by the Ministry of Finance (its Budget Division) and presented by the Finance Minister, not by the Finance Commission.
- (c)To advise the President on financial matters — This is too vague and is not the Commission's defined duty. The Finance Commission makes specific devolution and grants-in-aid recommendations under Article 280 — it is not a general financial adviser to the President.
- (d)To allocate funds to various Ministries/Departments of the Union and State Governments — Allocating funds to ministries and departments is done through the budget/appropriation process by the respective governments, not by the Finance Commission.
The Finance Commission (Article 280) is a quasi-judicial body constituted by the President every five years (or earlier), consisting of a Chairman and four other members. It recommends (i) the vertical division of the divisible pool of central taxes between the Union and the States, (ii) the horizontal share among the States, (iii) the principles of grants-in-aid from the Consolidated Fund of India, and (iv) measures to augment State funds to support Panchayats and Municipalities. Its recommendations are advisory and are laid before Parliament under Article 281.
Eliminate options that describe executive/budget work: preparing the budget and allocating money to departments are government functions, and 'advising the President' is a distractor for the Commission's precise remit. What is uniquely the Finance Commission's is dividing tax revenue between the Union and the States — option (a).
- Article 280 — Finance Commission constituted by the President every fifth year
- Composition: a Chairman and four other members (quasi-judicial body)
- Recommends vertical (Union–States) and horizontal (among States) sharing of the divisible tax pool, plus grants-in-aid
- The 15th Finance Commission (chaired by N.K. Singh) recommended 41% of the divisible pool to the States for its 2021–26 award
- Divisible pool of central taxes
- Vertical share: Union ⇄ States (e.g., 41% to States, 15th FC)
- Horizontal share: distribution among the States
- Principles of grants-in-aid to States
The Commission's primary duty = recommending how tax revenue is shared between the Union and the States (option a).
- Confusing the Finance Commission with the body that prepares the Budget (Ministry of Finance)
- Assuming it allocates money to ministries — that is done through the appropriation/budget process
UPSC and UPPSC ask either the 'primary function' directly or as a statement set separating genuine functions (tax devolution, grants-in-aid) from decoys (withdrawals from the Consolidated Fund, supervising tax collection).
The primary function of the Finance Commission in India is to
- (a) distribute revenue between the Centre and the States
- (b) prepare the Annual Budget
- (c) advise the President on financial matters
- (d) allocate funds to various ministries of the Union and State Governments
Answer(a) distribute revenue between the Centre and the States
Near-identical question — the primary function of the Finance Commission is sharing revenue between the Centre and the States.
Consider the following statements: The function(s) of the Finance Commission is/are 1. To allow the withdrawal of money out of the Consolidated Fund of India. 2. To allocate between the States the shares of proceeds of taxes. 3. To consider applications for grants-in-aid from States. 4. To supervise and report on whether the Union and State governments are levying taxes in accordance with the budgetary provisions. Which of these statements is/are correct?
- (a) Only 1
- (b) 2 and 3
- (c) 3 and 4
- (d) 1, 2 and 4
Answer(b) 2 and 3
Same body — separates genuine functions (allocating tax shares among States, grants-in-aid) from decoys, reinforcing the revenue-distribution role.
With reference to Union Finance Commission, which of the following statement/s is/are correct? (1) Finance Commission has a Chairman and six members. (2) It submits its report to the NITI Aayog. Select the correct answer using the code given below –
- (a) Only 2
- (b) Neither 1 nor 2
- (c) Both 1 and 2
- (d) Only 1
Answer(b) Neither 1 nor 2
Same body — tests its composition (a Chairman + four, not six, members) and that it reports to the President, not NITI Aayog.
- practice — not a real PYQ
Under which Article of the Constitution is the Finance Commission of India constituted?
- (a)Article 263
- (b)Article 280
- (c)Article 300A
- (d)Article 324
Answer(b) Article 280 — the President constitutes it every fifth year.
- practice — not a real PYQ
The Finance Commission consists of a Chairman and how many other members?
- (a)two
- (b)three
- (c)four
- (d)six
Answer(c) four other members — appointed by the President.