Why in News?
Shri T. Rabi Sankar, Deputy Governor of RBI, has been appointed as a part-time Member of the 16th Finance Commission (XVIFC) following the resignation of Shri Ajay Narayan Jha.

About 16th Finance Commission:

What It is?
A constitutional body constituted under Article 280 of the Indian Constitution.
It recommends the distribution of tax revenues between the Union and States and evaluates fiscal needs of local bodies.

Establishment and Tenure:
The 16th Finance Commission (XVIFC) was set up on 31 December 2023.
It is tasked with giving recommendations for the award period from 1 April 2026 to 31 March 2031.

Terms Of Reference for 16th Finance Commission:

• Distribution of Tax Revenues between Centre and States under Part XII of the Constitution.
• Principles for Grant-in-aid under Article 275 for revenue support (excluding specific purposes).
• Measures to augment State Consolidated Funds to support Panchayats and Municipalities, as per State Finance Commission’s recommendations.

Administrative Details:

Qualifications for Members (As per Finance Commission Act, 1951):
Members must have:

• Judicial or High Court experience, or
• Expertise in finance, economics, administration, or
• Knowledge of government finance and accounts.

Disqualifications:
A person is disqualified if:

• Of unsound mind, undischarged insolvent, or
• Convicted of moral turpitude, or
• Holds conflicting financial interests affecting impartiality.

Term of Office:

• Tenure as per Presidential notification and eligible for reappointment.
• Members can resign via letter to the President.

Powers And Functions:
The Commission acts with civil court powers under the Code of Civil Procedure, 1908, for:

• Summoning witnesses,
• Requiring documents,
• Requisitioning records, and
• Seeking public authority cooperation.
• It can demand information from individuals and institutions relevant to its mandate.
• The Commission has jurisdiction across India.
  

About the Finance Commission

1. Constitutional Basis

• The Finance Commission is a constitutional body established under Article 280 of the Indian Constitution.

2. Appointment and Tenure

• It is appointed every five years by the President of India.

3. Key Functions

• It recommends the distribution of tax revenues between the Centre and the States.
• It advises on grants-in-aid to the states from the Consolidated Fund of India.

4. Purpose

• It ensures a fair financial relationship in India’s federal structure.
• It considers the needs of states, central fiscal conditions, and factors such as population and income distance.

5. Historical Background

• The first Finance Commission was set up in 1951 and was chaired by K.C. Neogy.

composition of 16th finance commission –