About Finance Commission 

• The Finance Commission is a constitutional body set up under Article 280 of the Constitution. 
• Under Article 280, the President of India is required to constitute a Finance Commission at an interval of five years or earlier. 

What are the qualifications for Members?

• The Finance Commission has a chairman and four members appointed by the President.
• The Chairman of the Commission is selected from among persons who have had experience in public affairs, and the four other members are selected from among persons who–
  • are, or have been, or are qualified to be appointed as Judges of a High Court; or
  • have special knowledge of the finances and accounts of Government; or
  • have had wide experience in financial matters and in administration; or
  • have special knowledge of economics

What are the functions of the Finance Commission?

• It is the duty of the Commission to make recommendations to the President as to—  
  • the distribution of tax proceeds between the Union and the States and the share of each state.
  • the principles which should govern the grants-in-aid of the revenues of the States out of the Consolidated Fund of India;
  • 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;
  • 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;
  • any other matter referred to the Commission by the President in the interests of sound finance.

Why in News?

• The Union Cabinet has approved the Terms of Reference for the Sixteenth Finance Commission.

https://pib.gov.in/PressReleasePage.aspx?PRID=1980688