Constitution of India · Part XII: Finance, Property, Contracts and Suits · Distribution of Revenues between the Union and the States
Article 280: Finance Commission
In plain words
The President must set up a Finance Commission within two years of the start of the Constitution and then every fifth year, or earlier if needed, with a Chairman and four other members. Parliament can set their qualifications and selection by law.
- It recommends how the net proceeds of shared taxes are divided between the Union and the States and among the States, and the principles for grants-in-aid to States.
- It also recommends measures to increase a State's Consolidated Fund to support its Panchayats and Municipalities, based on the State Finance Commission's recommendations, and other matters the President refers.
- It sets its own procedure, with powers Parliament gives it by law.
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 President shall, within two years from the commencement of this Constitution and thereafter at the expiration of every fifth year or at such earlier time as the President considers necessary, by order constitute a Finance Commission which shall consist of a Chairman and four other members to be appointed by the President.
(2) Parliament may by law determine the qualifications which shall be requisite for appointment as members of the Commission and the manner in which they shall be selected.
(3) It shall be the duty of the Commission to make recommendations to the President as to—
(a) the distribution between the Union and the States of the net proceeds of taxes which are to be, or may be, divided between them under this Chapter and the allocation between the States of the respective shares of such proceeds;
(b) the principles which should govern the grants-in-aid of the revenues of the States out of the Consolidated Fund of India; [(bb) the measures needed to augment the Consolidated Fund of a State to supplement the resources of the Panchayats in the State on the basis of the recommendations made by the Finance Commission of the State;] [(c) the measures needed to augment the Consolidated Fund of a State to supplement the resources of the Municipalities in the State on the basis of the recommendations made by the Finance Commission of the State;] [(d)] any other matter referred to the Commission by the President in the interests of sound finance.
(4) The Commission shall determine their procedure and shall have such powers in the performance of their functions as Parliament may by law confer on them.
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.