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Mindmap: Finance Commission | Indian Polity for UPSC CSE

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FAQs on Mindmap: Finance Commission - Indian Polity for UPSC CSE

1. What is the Finance Commission?
Ans. The Finance Commission is a constitutional body in India that is responsible for making recommendations on the distribution of tax revenues between the central government and the state governments.
2. How is the Finance Commission formed?
Ans. The Finance Commission is formed every five years through a presidential order. It consists of a chairman and four other members who are appointed by the President of India.
3. What is the role of the Finance Commission?
Ans. The main role of the Finance Commission is to recommend the distribution of tax revenues between the central government and the state governments. It also suggests measures to improve the financial position of the states and makes recommendations on grants-in-aid to states.
4. How does the Finance Commission determine the distribution of tax revenues?
Ans. The Finance Commission takes into consideration various factors such as population, income distance, and fiscal capacity while determining the distribution of tax revenues. It also considers the needs and special characteristics of different states.
5. What are the key challenges faced by the Finance Commission?
Ans. The Finance Commission faces challenges such as balancing the needs of different states, ensuring fiscal discipline, and addressing issues related to vertical and horizontal imbalances in the distribution of tax revenues. It also needs to adapt to changing economic and fiscal conditions.
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