Article 280 of CoI : Article 280: Finance Commission.

Explanation using Example

Example 1:

Scenario: Distribution of Tax Revenue between Union and States

Context: The Finance Commission has been constituted by the President as per Article 280 of the Constitution of India. The Commission is tasked with recommending how the tax revenue collected by the Union government should be distributed between the Union and the States.

Example: The Finance Commission recommends that 42% of the net proceeds of Union taxes should be distributed to the States. This means if the Union government collects ₹100, ₹42 will be distributed among the States based on certain criteria such as population, income distance, area, and forest cover.

Impact: This ensures that States have adequate funds to manage their own budgets and provide public services such as healthcare, education, and infrastructure development.

Example 2:

Scenario: Grants-in-Aid to States

Context: The Finance Commission is also responsible for recommending principles for grants-in-aid to the States from the Consolidated Fund of India.

Example: The Finance Commission recommends a special grant of ₹10,000 crore to a drought-affected State to help it manage the crisis. This grant is over and above the regular share of tax revenue.

Impact: This helps the State government to provide immediate relief to the affected population, such as supp...

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