(THE GIST OF PIB) Sixteenth Finance Commission

(MAY-2024)

The Sixteenth Finance Commission (XVIFC) has invited suggestions/views from general public, interested organisations and individuals on the terms of reference for the XVIFC as speciﬁed below, as well as the general approach that the XVIFC may adopt.
The XVIFC is required to make recommendations covering a period of ﬁve years commencing on 01st April 2026 as to the following matters:
The distribution between the Union and the States of the net proceeds of taxes and the allocation between the States of the respective shares of such proceeds;
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;
The measures needed to augment the Consolidated Fund of a State to supplement the resources of the Panchayats and Municipalities in the State.
The XVIFC is also mandated to review the present arrangements on ﬁnancing Disaster Management initiatives, with reference to the funds constituted under the Disaster Management Act, 2005, and make appropriate recommendations thereon.

The Finance Commission is a constitutional body set up under Article 280 of the Constitution.
Under Article 280, the President of India is required to constitute a Finance Commission at an interval of five years or earlier.

The Finance Commission has a chairman and four members appointed by the President.
The Chairman of the Commission is selected from among persons who have had experience in public affairs, and the four other members are selected from among persons who–
are, or have been, or are qualified to be appointed as Judges of a High Court; or
have special knowledge of the finances and accounts of Government; or
have had wide experience in financial matters and in administration; or
have special knowledge of economics

It is the duty of the Commission to make recommendations to the President as to—
the distribution of tax proceeds between the Union and the States and the share of each state.
the principles which should govern the grants-in-aid of the revenues of the States out of the Consolidated Fund of India;
the measures needed to augment the Consolidated Fund of a State to supplement the resources of the Panchayats in the State on the basis of the recommendations made by the Finance Commission of the State;
the measures needed to augment the Consolidated Fund of a State to supplement the resources of the Municipalities in the State on the basis of the recommendations made by the Finance Commission of the State;
any other matter referred to the Commission by the President in the interests of sound finance.