Model Question and Answers for APSC | How is the Finance Commission of India constituted? Discuss the terms of reference of the 15th Finance commission. (APSC 2018)

Ans : The Finance Commission is a constitutional body formed by the President of India to give suggestions on entre-state financial relations. The 15th Finance Commission (Chair: Mr N. K. Singh) was required to submit two reports. The first report, consisting of recommendations for the financial year 2020-21, was tabled in Parliament on February 1, 2020. The final report with recommendations for the 2021-26 period.
The terms of reference of the 15th Finance commission

1. The distribution between the Union and the States of the net proceeds of taxes
2. The principles which should govern the grants-in-aid of the revenues of the States out of the Consolidated Fund of India and the sums to be paid to the States by way of grants-in-aid of their revenues under Article 275 of the Constitution
3. The measures needed to augment the Consolidated Fund of a State to supplement the resources of the Panchayats and Municipalities in the State on the basis of the recommendations made by the Finance Commission of the State.
4. The Commission shall review the current status of the finance, deficit, debt levels, cash balances and fiscal discipline efforts of the Union and the States, and recommend a fiscal consolidation roadmap for sound fiscal management
5. The Commission may consider proposing measurable performance-based incentives for States

6. The Commission may review the present arrangements on financing Disaster Management initiatives
7. The Commission shall use the population data of 2011 while making its recommendations