Constitution of India · Part IXA: The Municipalities
Article 243Y: Finance Commission
In plain words
The State Finance Commission set up under article 243I also reviews the finances of the Municipalities and recommends how State taxes should be shared with them, which taxes they can levy or receive, what grants-in-aid they get, and how to improve their finances.
- The Governor must lay its recommendations, with a memorandum on action taken, before the State Legislature.
A simplified explanation, prepared with AI assistance from the official text below and checked automatically against it for numbers and cross-references. The official text is the law and prevails over this summary. Not legal advice.
Official text
(1) The Finance Commission constituted under article 243I shall also review the financial position of the Municipalities and make recommendations to the Governor as to—
(a) the principles which should govern—
(i) the distribution between the State and the Municipalities of the net proceeds of the taxes, duties, tolls and fees leviable by the State, which may be divided between them under this Part and the allocation between the Municipalities at all levels of their respective shares of such proceeds;
(ii) the determination of the taxes, duties, tolls and fees which may be assigned to, or appropriated by, the Municipalities;
(iii) the grants-in-aid to the Municipalities from the Consolidated Fund of the State;
(b) the measures needed to improve the financial position of the Municipalities;
(c) any other matter referred to the Finance Commission by the Governor in the interests of sound finance of the Municipalities.
(2) The Governor shall cause every recommendation made by the Commission under this article together with an explanatory memorandum as to the action taken thereon to be laid before the Legislature of the State.
Source: India Code (Legislative Department), the official text of the Constitution of India. As amended up to the Constitution (One Hundred and Sixth Amendment) Act, 2023. Text as on 10 September 2026. Words in square brackets [ ] were inserted or substituted by later amending Acts, and *** marks words omitted by an amendment. The amendment footnotes are not reproduced here. Official text on India Code.