Sixteenth Finance Commission (XVIFC)

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The Sixteenth Finance Commission (XVIFC) invites suggestions/views from general public, interested organisations and individuals on the terms of reference for the XVIFC as specified below, as well as the general approach that the XVIFC may adopt. Views are also invited on any other issue relevant to the work of the XVIFC.

Suggestions may be submitted through the website of the 16th Finance Commission https://fincomindia.nic.in/portal/feedback) under the section ‘Call for Suggestions’.

The Sixteenth Finance Commission (XVIFC) has been constituted in pursuance of the provisions of the Constitution of India by the President with Dr. Arvind Panagariya as Chairman vide a Notification dated 31st December 2023. The XVIFC is required to make recommendations covering a period of five years commencing on 01st April 2026 as to the following matters:

  1. 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 Chapter I, Part XII of the Constitution and the allocation between the States of the respective shares of such proceeds;
  2. The principles which should govern the grants-in-aid of the revenues of the States out of the Consolidated Fund of India and the sums to be paid to the States by way of grants-in-aid of their revenues under article 275 of the Constitution for the purposes other than those specified in the provisos to clause (1) of that article; and
  3. The measures needed to augment the Consolidated Fund of a State to supplement the resources of the Panchayats and Municipalities in the State on the basis of the recommendations made by the Finance Commission of the State.

The XVIFC is also mandated to review the present arrangements on financing Disaster Management initiatives, with reference to the funds constituted under the Disaster Management Act, 2005 (53 of 2005), and make appropriate recommendations thereon.

PIB

Constitutional Provisions:

State Finance Commission:

243-I. Constitution of Finance Commission to review financial position.—

(1) The Governor of a State shall, as soon as may be within one year from the commencement of the Constitution (Seventy-third Amendment) Act, 1992, and thereafter at the expiration of every fifth year, constitute a Finance Commission to review the financial position of the Panchayats and to make recommendations to the Governor as to— 

(a) the principles which should govern— 

(i) the distribution between the State and the Panchayats 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 Panchayats 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 Panchayats; 

(iii) the grants-in-aid to the Panchayats from the Consolidated Fund of the State; 

(b) the measures needed to improve the financial position of the Panchayats; 

(c) any other matter referred to the Finance Commission by the Governor in the interests of sound finance of the Panchayats. 

(2) The Legislature of a State may, by law, provide for the composition of the Commission, the qualifications which shall be requisite for appointment as members thereof and the manner in which they shall be selected. 

(3) The Commission shall determine their procedure and shall have such powers in the performance of their functions as the Legislature of the State may, by law, confer on them. 

(4) 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.

Central Finance Commission:

280. Finance Commission.—

(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; 

1 [(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;] 

2 [(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;] 

3 [(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.

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1. Ins. by the Constitution (Seventy-third Amendment) Act, 1992, s. 3 (w.e.f. 24-4-1993). 

2. Ins. by the Constitution (Seventy-fourth Amendment) Act, 1992, s. 3 (w.e.f. 1-6-1993). 

3. Sub-clause (c) re-lettered as sub-clause (d) by s. 3, ibid. (w.e.f. 1-6-1993).

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281. Recommendations of the Finance Commission.—The President shall cause every recommendation made by the Finance Commission under the provisions of this Constitution together with an explanatory memorandum as to the action taken thereon to be laid before each House of Parliament. 

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