Financial Provisions of Indian Constitution

Financial Adjustments in India
A federal government is a system of dividing up power between a

central national government and local state governments that are
connected to one another by the national government. Some areas
of public life are under the control of the national government, and
some areas are under control of the local governments.
Federal governments are best used in large countries where there

exists a diverse group of people with diverse needs but a common
culture that unites them together.
The Constitution of India establishes a federal structure to the
Indian government, declaring it to be a "Union of States". Part XI
of the Indian constitution specifies the distribution of legislative,
administrative and executive powers between the Central
government and the States of India. The legislative powers are
categorised under a Union List, a State List and a Concurrent List,
representing, respectively, the powers conferred upon the Union
government, those conferred upon the State governments and
powers shared among them.
Features
There are two or more levels (tiers) of government.

Each level of government has its own jurisdiction in matters of
legislation, taxation and administration even though they govern
the same citizens.
Powers and functions of each tier of government is specified and
guaranteed by Constitution.
The Supreme Court has been given power to settle disputes
between federal governments.
Fundamental provisions of Constitution cannot be altered by any
one level of government.
Methods of Adjustments of Federal Finance
1. Tax Sharing:
Under this method, the proceeds of certain selected taxes, imposed
and realised by the Centre, are apportioned between the Centre and
the different states. In India, the income tax and some union excise
duties are taxes which are shared.
2. Reallocation of Functions:
Sometimes, when it is found that certain functions, though assigned
to the state government, can very well be carried out by the central
government with the same efficiency, it is desirable for the Centre
itself to take over such functions, thus, relieving the state
governments of the administrative burden.
3. Grants-in-aid:
For making the necessary adjustments in state resources, the
central government has the constitutional power to make grants
to the state governments in most federations of today.
Undoubtedly the grants-in-aid from the Centre constitute a more
definite and dependable source of revenue to the state
governments than the method of sharing tax yields of the Centre.
Finance Commission
The latest constitutional provisions of finance commission India are
The President of India shall, within maximum of two years from

the commencement of the draft and thereafter completion of every
fifth year or at earlier time (as he deems necessary), by order should
constitute a Finance Commission
The Finance Commission shall consist of a chairman and four

other members, appointed by the President himself
The elected parliament may by formulating appropriate law

determine the qualifications of such members of the Finance
Commission and it may also determine the manner in which the
members shall be selected.
Duties of the Finance Commission
The duty of the Finance Commission shall entail recommendations
to the President of India on -
1. Distribution of the income of the government (including central

and provisions governments) as per proportion or according to
the contribution made towards such collection of revenues by
each such provisions governments or central government
2. Define the grounds on which the government should allocate the

grants-in-aid of the revenues of the Indian provisions out of the
consolidated fund of India. The quantum of allocation of such
funds need to compliment the requirements of the panchayat and
resource of the Consolidated Fund of a provisions
3. The quantum of allocation of such funds need to compliment
the requirements of the Municipalities in the provisions and
the resources of the Finance Commission of the provisions
4. Any other matter referred to the Commission by the President

in the interests of sound finance. The Finance Commission of
India shall also determine the operational process and is vested
with such powers in the operation as per the provisions enacted
by the parliament of India.

Financial Provisions of Indian Constitution

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Financial Provisions of Indian Constitution

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Financial Adjustments in India

A federal government is a system of dividing up power between a

Federal governments are best used in large countries where there

There are two or more levels (tiers) of government.

The President of India shall, within maximum of two years from

The Finance Commission shall consist of a chairman and four

The elected parliament may by formulating appropriate law

1. Distribution of the income of the government (including central

2. Define the grounds on which the government should allocate the

4. Any other matter referred to the Commission by the President

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