Q1. Under which Article of the Indian Constitution is the Finance Commission established?
- Article 270
- Article 280
- Article 275
- Article 282
Correct Option: 2. Article 280.
Explanation: The Finance Commission is constituted under Article 280 of the Constitution of India. It provides for a quasi-judicial body that recommends financial relations between the Centre and the States.
Q2. Which of the following is NOT a qualification required for members of the Finance Commission?
- Specialised knowledge of International affairs
- Experience in financial matters and administration
- Experience in public affairs
- Knowledge of finance and accounts of the government
Correct Option: 1. Specialised knowledge of International affairs.
Explanation: The qualifications for members include expertise in:
Public affairs (for the Chairman),
Law (judge or qualified to be a judge of a High Court),
Finance and accounts of the government,
Financial administration, and
Economics.
Q3. Which statement about the recommendations of the Finance Commission is TRUE?
- They are legally binding on the Union government.
- They automatically become law once submitted to the President.
- They are advisory and not binding on the government.
- They require approval by the Supreme Court.
Correct Option: 3. They are advisory and not binding on the government..
Explanation: The Finance Commission’s recommendations are advisory in nature. The government is not bound to accept them, though they carry significant weight due to the constitutional status of the Commission.
Q4. What was a major factor that undermined the Finance Commission’s role before 2014?
- Overlapping functions with the Planning Commission
- Opposition from the States
- Lack of constitutional backing
- Absence of a permanent office
Correct Option: 1. Overlapping functions with the Planning Commission.
Explanation: The Finance Commission’s role in Centre–State fiscal relations was undermined by the Planning Commission, which was a non-constitutional body that also dealt with financial transfers to states, leading to functional overlaps.
Q5. Which of the following is NOT one of the functions of the Finance Commission?
- Recommending the distribution of tax revenues between Centre and States
- Recommending the principles for grants-in-aid
- Suggesting measures to augment the funds of local bodies
- Preparing the annual budget for the Union Government
Correct Option: 4. Preparing the annual budget for the Union Government.
Explanation: The Union budget is prepared by the Ministry of Finance, not the Finance Commission. The Finance Commission focuses on:
-Distribution of tax revenues,
-Grants-in-aid,
-Support for local bodies,
-And other matters referred by the President.