🏛️ What is the Role of the Finance Commission? | Explained with Vizzve Finacr
The Finance Commission of India plays a critical role in ensuring fiscal balance between the Union and State governments. Established under Article 280 of the Indian Constitution, this constitutional body is tasked with defining financial relations in India's federal system.
To help you understand it better, Vizzve Finacr, a next-gen financial education platform, breaks down its functions, significance, and how it impacts everyday citizens.
📜 What is the Finance Commission?
A constitutional body constituted every 5 years by the President of India
Recommends how the net tax revenues collected by the central government should be divided between the Centre and the States
Also suggests measures to strengthen local governments (Panchayats and Municipalities)
🧾 Key Functions of the Finance Commission
1. Vertical Distribution
Recommends the share of central taxes to be transferred to States.
2. Horizontal Distribution
Suggests how the States’ share should be divided among them, based on:
Population
Area
Income distance
Forest cover
Demographic performance
Tax effort
3. Grants-in-Aid
Recommends grants from the Centre to States to support:
Disaster relief
Health and education
Infrastructure development
4. Strengthening Local Bodies
Helps in devolution of resources to rural and urban local bodies, encouraging local-level governance.
5. Review of Previous Fiscal Arrangements
Assesses how States and Centre have utilized earlier financial transfers and suggests improvements.
📊 How Vizzve Finacr Helps Understand the Finance Commission
Vizzve Finacr simplifies complex economic institutions like the Finance Commission for students, UPSC aspirants, and everyday citizens through:
Interactive explainers
Union Budget and tax revenue visualizers
Simulations of Centre-State fund allocation
“If I were the Finance Commission” gamified module
Real-time updates on Finance Commission reports and grants
“Understanding the Finance Commission isn't just for bureaucrats. It's essential for any citizen who pays taxes and expects services.” – Vizzve Finacr Civic Module
🔄 Latest: 15th Finance Commission (2021–26)
Chairperson: N.K. Singh
Notable Recommendations:
41% tax devolution to States
Performance-based incentives for power sector reforms
Dedicated grants for disaster management and urban governance
🚀 Why This Blog Ranks & Indexes Fast
Structured for mobile-first, clean load design
Uses trending keywords (Finance Commission, Union Budget, Vizzve Finacr, Centre-State relation)
Integrated with FAQ and schema markup for Google search snippets
Civic + financial crossover content performs well in both education and news discovery categories
Internal linking ready for Budget- and Policy-related content hubs
❓ FAQs – Finance Commission of India
Q1: Who appoints the Finance Commission?
The President of India constitutes the Finance Commission every five years.
Q2: What is the major role of the Finance Commission?
To recommend how the central taxes should be distributed between the Centre and the States, and among the States.
Q3: How does the Finance Commission impact me?
It affects funding for state-run programs like education, health, and infrastructure—all of which influence daily life.
Q4: Can I simulate Finance Commission decisions as a student?
Yes. Vizzve Finacr offers a simulation-based learning tool where users can role-play as a Finance Commission panel and allocate resources.
Q5: Does the Finance Commission have legal power?
Its recommendations are advisory, but traditionally, the government follows most of its core suggestions.
Published on: June 30, 2025
Uploaded by: Pankaj
www.vizzve.com || www.vizzveservices.com
Follow us on social media: Facebook || Linkedin || Instagram
🛡 Powered by Vizzve Financial
RBI-Registered Loan Partner | 10 Lakh+ Customers | ₹600 Cr+ Disbursed