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CS Professional · CSR and Social Governance · Local Self Governance

The Governor of a State in India wishes to constitute a body to review the financial position of the Panchayats and Municipalities and recommend the principles governing the distribution of State tax proceeds between the State and these local bodies. Which body must be constituted for this purpose?

The State Finance Commission must be constituted by the Governor. It reviews the finances of Panchayats and Municipalities and recommends how State tax proceeds are shared with them. The Union Finance Commission is appointed by the President and handles Centre-State matters, not local body devolution within a State.

  1. AState Finance Commission, constituted under Articles 243-I and 243-YCorrect
  2. BFinance Commission of India, constituted under Article 280
  3. CState Planning Board of the concerned State
  4. DDistrict Planning Committee under Article 243ZD

Explanation

The Constitution (73rd and 74th Amendments) requires the Governor to constitute a State Finance Commission to review the finances of Panchayats and Municipalities and make recommendations. The Finance Commission under Article 280 is set up by the President and deals with Union-State devolution. The District Planning Committee prepares draft development plans, not fiscal devolution recommendations.

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