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Fifteenth Finance Commission

Fifteenth Finance Commission

The Union cabinet has approved constitution of the Fifteenth Finance Commission that will decide the formula for sharing of taxes between the Centre and states for five years starting April 1, 2020. 

Article 280 of the Constitution requires setting up of a finance commission within two years from the commencement of this Constitution and thereafter at the expiration of every fifth year. 

The Finance Commission was established by the President of India in 1951 under Article 280 of the Indian Constitution. 

It was formed to define the financial relations between the central government of India and the individual state governments. 

The Finance Commission (Miscellaneous Provisions) Act of 1951 additionally defines the terms of qualification, appointment and disqualification, the term, eligibility and powers of the Finance Commission. As per the Constitution, the Commission is appointed every five years and consists of a chairman and four other members.. 

The Chairman of the Finance Commission is selected from people with experience of public affairs.

  • The other four members are selected from people who: 
  • Are, or have been, or are qualified, as judges of High Court, 
  • Have knowledge of Government finances or accounts, or 
  • Have had experience in administration and financial expertise; or 
  • Have special knowledge of economics 

The 14th Finance Commission was set up on January 2, 2013. Headed by former Reserve Bank of India governor YV Reddy, its recommendations cover the period from April 1, 2015 to March 31, 2020. The Fourteenth Finance Commission had stepped up the share of states in net central taxes to 42% from 32%.