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Which of the following statements are correct regarding the financial relationship between the Centre and the States in India ?
1. The Constitution of India provides for vertical and horizontal distribution of taxes between the Centre and the States.
2. The Finance Commission is a constitutional body that recommends the distribution of taxes between the Centre and the States.
3. The States have the power to levy and collect income tax.
4. The Centre can provide grants-in-aid to States for specific purposes.
Select the correct answer using the code given below :
- a)1 and 2 only
- b)2 and 3 only
- c)1, 2 and 4 only
- d)1, 2, 3 and 4
Correct answer is option 'C'. Can you explain this answer?
Verified Answer
Which of the following statements are correct regarding the financial ...
The Finance Commission is a constitutional body, formed under Article 280 of the Indian Constitution. The main purpose of forming the Finance Commission is to give its recommendations on the distribution of Tax revenues between the Centre and the states as well as among the states. The Finance Commission is required to recommend the distribution of the net proceeds of taxes of the Union between the Union and the States (commonly referred to as vertical devolution), and the allocation between the States of the respective shares of such proceeds (commonly known as horizontal devolution). So, Statement 1 is correct. The Finance Commission is constituted by the President every fifth year or even earlier. It is required to make recommendations to the President on the following matters:
- The distribution of the net proceeds of taxes to be shared between the Centre and the states, and the allocation between the states, the respective shares of such proceeds.
- The principles which should govern the grants-in-aid to the states by the Centre (i.e., 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 and the municipalities in the state on the basis of the recommendations made by the State Finance Commission.
- Any other matter referred to it by the President in the interests of sound finance. So, Statement 2 is correct.
- The taxing powers of the central government encompass taxes on income (except agricultural income), excise on goods produced (other than alcohol), customs duties, and inter-state sale of goods. The state governments are vested with the power to levy income tax on agricultural income, land and buildings, sale of goods (other than inter-state), stamp duty and excise on alcohol. Local authorities such as Panchayat and Municipality also have the power to levy some minor taxes. In general, the central government has the power to levy and collect personal and corporate income tax. So, Statement 3 is not correct.
- Besides sharing of taxes between the Centre and the states, the Constitution provides for grants-in-aid to the states from the Central resources. There are two types of grants-in-aid, Statutory Grants: Article 275 empowers the Parliament to make grants to the states which are in need of financial assistance and not to every state. Also, different sums may be fixed for different states. These sums are charged on the Consolidated Fund of India every year. Apart from this general provision, the Constitution also provides for specific grants for promoting the welfare of the scheduled tribes in a state or for raising the level of administration of the scheduled areas in a state including the State of Assam.
- Discretionary Grants: Article 282 empowers both the Centre and the states to make any grants for any public purpose, even if it is not within their respective legislative competence. Under this provision, the Centre makes grants to the states. So, Statement 4 is correct.
Most Upvoted Answer
Which of the following statements are correct regarding the financial ...
Explanation:
Vertical and Horizontal Distribution of Taxes:
- The Constitution of India provides for both vertical and horizontal distribution of taxes between the Centre and the States.
- Vertical distribution refers to the allocation of taxes between the Centre and the States, while horizontal distribution pertains to the distribution of taxes among the States.
Role of Finance Commission:
- The Finance Commission is a constitutional body that plays a crucial role in recommending the distribution of taxes between the Centre and the States.
- It also suggests measures to augment the consolidated fund of the State to supplement the resources of the panchayats and municipalities.
Power to Levy Income Tax:
- The power to levy and collect income tax lies solely with the Central government in India.
- States do not have the authority to impose income tax on their residents.
Grants-in-Aid from Centre to States:
- The Centre can provide grants-in-aid to States for specific purposes such as promoting economic development, maintaining law and order, and implementing welfare schemes.
- These grants are often given with certain conditions attached, and their allocation is based on various criteria set by the Central government.
In conclusion, all the statements provided in the question are correct regarding the financial relationship between the Centre and the States in India. The Constitution lays down the framework for the distribution of taxes, the Finance Commission plays a key role in this process, States do not have the power to levy income tax, and the Centre can provide grants-in-aid to States for specific purposes.
Vertical and Horizontal Distribution of Taxes:
- The Constitution of India provides for both vertical and horizontal distribution of taxes between the Centre and the States.
- Vertical distribution refers to the allocation of taxes between the Centre and the States, while horizontal distribution pertains to the distribution of taxes among the States.
Role of Finance Commission:
- The Finance Commission is a constitutional body that plays a crucial role in recommending the distribution of taxes between the Centre and the States.
- It also suggests measures to augment the consolidated fund of the State to supplement the resources of the panchayats and municipalities.
Power to Levy Income Tax:
- The power to levy and collect income tax lies solely with the Central government in India.
- States do not have the authority to impose income tax on their residents.
Grants-in-Aid from Centre to States:
- The Centre can provide grants-in-aid to States for specific purposes such as promoting economic development, maintaining law and order, and implementing welfare schemes.
- These grants are often given with certain conditions attached, and their allocation is based on various criteria set by the Central government.
In conclusion, all the statements provided in the question are correct regarding the financial relationship between the Centre and the States in India. The Constitution lays down the framework for the distribution of taxes, the Finance Commission plays a key role in this process, States do not have the power to levy income tax, and the Centre can provide grants-in-aid to States for specific purposes.
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Which of the following statements are correct regarding the financial relationship between the Centre and the States in India ?1. The Constitution of India provides for vertical and horizontal distribution of taxes between the Centre and the States.2. The Finance Commission is a constitutional body that recommends the distribution of taxes between the Centre and the States.3. The States have the power to levy and collect income tax.4. The Centre can provide grants-in-aid to States for specific purposes.Select the correct answer using the code given below :a)1 and 2 onlyb)2 and 3 onlyc)1, 2 and 4 onlyd)1, 2, 3 and 4Correct answer is option 'C'. Can you explain this answer?
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Which of the following statements are correct regarding the financial relationship between the Centre and the States in India ?1. The Constitution of India provides for vertical and horizontal distribution of taxes between the Centre and the States.2. The Finance Commission is a constitutional body that recommends the distribution of taxes between the Centre and the States.3. The States have the power to levy and collect income tax.4. The Centre can provide grants-in-aid to States for specific purposes.Select the correct answer using the code given below :a)1 and 2 onlyb)2 and 3 onlyc)1, 2 and 4 onlyd)1, 2, 3 and 4Correct answer is option 'C'. Can you explain this answer? for UPSC 2025 is part of UPSC preparation. The Question and answers have been prepared according to the UPSC exam syllabus. Information about Which of the following statements are correct regarding the financial relationship between the Centre and the States in India ?1. The Constitution of India provides for vertical and horizontal distribution of taxes between the Centre and the States.2. The Finance Commission is a constitutional body that recommends the distribution of taxes between the Centre and the States.3. The States have the power to levy and collect income tax.4. The Centre can provide grants-in-aid to States for specific purposes.Select the correct answer using the code given below :a)1 and 2 onlyb)2 and 3 onlyc)1, 2 and 4 onlyd)1, 2, 3 and 4Correct answer is option 'C'. Can you explain this answer? covers all topics & solutions for UPSC 2025 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Which of the following statements are correct regarding the financial relationship between the Centre and the States in India ?1. The Constitution of India provides for vertical and horizontal distribution of taxes between the Centre and the States.2. The Finance Commission is a constitutional body that recommends the distribution of taxes between the Centre and the States.3. The States have the power to levy and collect income tax.4. The Centre can provide grants-in-aid to States for specific purposes.Select the correct answer using the code given below :a)1 and 2 onlyb)2 and 3 onlyc)1, 2 and 4 onlyd)1, 2, 3 and 4Correct answer is option 'C'. Can you explain this answer?.
Which of the following statements are correct regarding the financial relationship between the Centre and the States in India ?1. The Constitution of India provides for vertical and horizontal distribution of taxes between the Centre and the States.2. The Finance Commission is a constitutional body that recommends the distribution of taxes between the Centre and the States.3. The States have the power to levy and collect income tax.4. The Centre can provide grants-in-aid to States for specific purposes.Select the correct answer using the code given below :a)1 and 2 onlyb)2 and 3 onlyc)1, 2 and 4 onlyd)1, 2, 3 and 4Correct answer is option 'C'. Can you explain this answer? for UPSC 2025 is part of UPSC preparation. The Question and answers have been prepared according to the UPSC exam syllabus. Information about Which of the following statements are correct regarding the financial relationship between the Centre and the States in India ?1. The Constitution of India provides for vertical and horizontal distribution of taxes between the Centre and the States.2. The Finance Commission is a constitutional body that recommends the distribution of taxes between the Centre and the States.3. The States have the power to levy and collect income tax.4. The Centre can provide grants-in-aid to States for specific purposes.Select the correct answer using the code given below :a)1 and 2 onlyb)2 and 3 onlyc)1, 2 and 4 onlyd)1, 2, 3 and 4Correct answer is option 'C'. Can you explain this answer? covers all topics & solutions for UPSC 2025 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Which of the following statements are correct regarding the financial relationship between the Centre and the States in India ?1. The Constitution of India provides for vertical and horizontal distribution of taxes between the Centre and the States.2. The Finance Commission is a constitutional body that recommends the distribution of taxes between the Centre and the States.3. The States have the power to levy and collect income tax.4. The Centre can provide grants-in-aid to States for specific purposes.Select the correct answer using the code given below :a)1 and 2 onlyb)2 and 3 onlyc)1, 2 and 4 onlyd)1, 2, 3 and 4Correct answer is option 'C'. Can you explain this answer?.
Solutions for Which of the following statements are correct regarding the financial relationship between the Centre and the States in India ?1. The Constitution of India provides for vertical and horizontal distribution of taxes between the Centre and the States.2. The Finance Commission is a constitutional body that recommends the distribution of taxes between the Centre and the States.3. The States have the power to levy and collect income tax.4. The Centre can provide grants-in-aid to States for specific purposes.Select the correct answer using the code given below :a)1 and 2 onlyb)2 and 3 onlyc)1, 2 and 4 onlyd)1, 2, 3 and 4Correct answer is option 'C'. Can you explain this answer? in English & in Hindi are available as part of our courses for UPSC.
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Which of the following statements are correct regarding the financial relationship between the Centre and the States in India ?1. The Constitution of India provides for vertical and horizontal distribution of taxes between the Centre and the States.2. The Finance Commission is a constitutional body that recommends the distribution of taxes between the Centre and the States.3. The States have the power to levy and collect income tax.4. The Centre can provide grants-in-aid to States for specific purposes.Select the correct answer using the code given below :a)1 and 2 onlyb)2 and 3 onlyc)1, 2 and 4 onlyd)1, 2, 3 and 4Correct answer is option 'C'. Can you explain this answer?, a detailed solution for Which of the following statements are correct regarding the financial relationship between the Centre and the States in India ?1. The Constitution of India provides for vertical and horizontal distribution of taxes between the Centre and the States.2. The Finance Commission is a constitutional body that recommends the distribution of taxes between the Centre and the States.3. The States have the power to levy and collect income tax.4. The Centre can provide grants-in-aid to States for specific purposes.Select the correct answer using the code given below :a)1 and 2 onlyb)2 and 3 onlyc)1, 2 and 4 onlyd)1, 2, 3 and 4Correct answer is option 'C'. Can you explain this answer? has been provided alongside types of Which of the following statements are correct regarding the financial relationship between the Centre and the States in India ?1. The Constitution of India provides for vertical and horizontal distribution of taxes between the Centre and the States.2. The Finance Commission is a constitutional body that recommends the distribution of taxes between the Centre and the States.3. The States have the power to levy and collect income tax.4. The Centre can provide grants-in-aid to States for specific purposes.Select the correct answer using the code given below :a)1 and 2 onlyb)2 and 3 onlyc)1, 2 and 4 onlyd)1, 2, 3 and 4Correct answer is option 'C'. Can you explain this answer? theory, EduRev gives you an
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