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Q56 (NDA-II/2008) Polity & Governance › Constitutional & Statutory Bodies › Finance Commission of India Answer Verified

Which of the following bodies is responsible for the distribution of revenues between the Centre and the States?

Result
Your answer: —  Â·  Correct: B
Explanation

The Finance Commission is a quasi-judicial body established under Article 280 of the Indian Constitution [4]. Its primary constitutional mandate is to recommend the distribution of the net proceeds of taxes between the Union and the States, known as vertical devolution, and the allocation among the States themselves, known as horizontal devolution [6]. It is constituted by the President of India every five years to ensure fiscal federalism and address vertical and horizontal fiscal imbalances [6]. While the Planning Commission (now replaced by NITI Aayog) previously handled developmental grants, the Finance Commission remains the constitutional authority for tax revenue distribution [7]. Other bodies like the Inter-State Council and National Development Council focus on policy coordination and federal cooperation rather than the specific fiscal task of tax revenue sharing [1].

Sources

  1. [3] Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 4: Government Budgeting > 1. Finance Commission Grants > p. 182
  2. [4] https://www.indiabudget.gov.in/budget2015-2016/es2014-15/echapvol1-10.pdf
  3. [5] https://en.wikipedia.org/wiki/Finance_Commission
  4. [6] https://interstatecouncil.gov.in/wp-content/uploads/2015/06/CHAPTERX.pdf
  5. [7] https://legalaffairs.gov.in/sites/default/files/chapter%208.pdf
  6. [1] Indian Polity, M. Laxmikanth(7th ed.) > Chapter 15: Centre-State Relations > I I Finance Commission > p. 156
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