UPSC Prelims 2003 Q73: Indian Polity – Public Finance & Finance Commission
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
Explanation
Functions of the Finance Commission
| Statement | Verdict |
|---|---|
| 1. To allow withdrawal of money from the Consolidated Fund | False: that is done by Parliament through appropriation |
| 2. To allocate between States the shares of tax proceeds | True — Article 280 |
| 3. To consider applications for grants-in-aid from States | True — recommends principles of grants under Article 275 |
| 4. To supervise whether taxes are levied per the budget | False: not its function |
Statements 2 and 3 are correct.
Answer: (b) 2 and 3.
Why each option is right or wrong
- (a) Incorrect. Withdrawals are authorised by Parliament.
- (b) CORRECT. Statements 2 and 3 are correct.
- (c) Incorrect. Statement 4 is not its function.
- (d) Incorrect. Statements 1 and 4 are not its functions.
Key point
Finance Commission: Article 280, every five years; recommends tax devolution and grants-in-aid.
Remember
The Finance Commission recommends the sharing of taxes and grants-in-aid.
Common mistakes
- Giving the Commission control of withdrawals.
- Treating it as a supervisory audit body.
- Forgetting grants-in-aid under Article 275.
Exam tip
FC: devolution and grants; CAG: audit; Parliament: withdrawals.
Sources
- Constitution of India — Articles 280 and 275
- M. Laxmikanth — Indian Polity (Finance Commission)