About the Topic: Finance Commission is a constitutional body responsible for recommending the distribution of financial resources between the Union and the States. Practice Finance Commission MCQ Questions with answers and explanations.
Generally, in India Finance Commission is appointed for every five years-
Correct Answer:
(D)
To determine the share of the States in the grants and revenues of the Central Government.
Article 280 of the Constitution provides for the formation of the Finance Commission after-- the expiration of every fifth year or at such earlier time as President considers necessary. Its main function is to submit recommendations to the President regarding the allocation of net proceeds of taxes between the Union and the States and the method of distribution among the States. It may be mentioned that the first Finance Commission was set up on November 22, 1951, in the Chairmanship of K.C. Neogy.
Ques: 2
Which one of the following authorities recommends the principles governing the grants-in-aid of the revenues to the States out of the Consolidated Fund of India?
Correct Answer:
(A) Finance Commission
The Finance Commission recommends the principle governing the grant-in-aid of the revenues to states out of Consolidated Fund of India. The Commission submits its report to the President.
Ques: 3
Which of the following recommends the principles for sharing of revenues among the Union and the States?
Correct Answer:
(A) Finance Commission
The function of the Finance Commission is to recommend the distribution of the net proceeds of taxes between the Union and the States; Inter-State Council is established for coordination and cooperation among states, and the main function of the Planning Commission is to allocate resources between the Centre and the States. The Planning Commission has been replaced by ‘Niti Aayog’ (National Institution For Transforming India).
Ques: 4
Consider the following statements- In India taxes on transactions in Stock-Exchanges and Futures Markets are –
Levied by Union.
Collected by the State Government.
Code :
Correct Answer:
(A) Only 1
Seventh Schedule of the Constitution is for distribution of powers between the Union and the States. There are 3 lists under this- Union List, State List and Concurrent List. According to the question, the tax imposed on the stock market and futures market belong to the Union List. However, under Article 270 of the Constitution, such taxes are Levied and collected by the union but assigned to the states.
Ques: 5
Consider the following statements:
The function (s) of the Finance Commission is/are –
To allow the withdrawal of the money out of the Consolidated Fund of India.
To allocate among the States the shares of proceeds of taxes.
To consider applications for grants-in-aid from States.
To supervise and report on whether the Union and State Governments are levying taxes in accordance with the budgetary provisions.
Which of these statements is/are correct?
Correct Answer:
(B) 2 and 3
According to Article 280(3) of the Constitution, the main functions of the Finance Commission is –
(1) To recommend the distribution of the net proceeds of taxes between the Union and the States.
(2) To determine the principles which should govern the grants in aid of the revenues to the States out of the Consolidated Fund of India.
(3) To suggest the necessary measures to increase the Consolidated Fund of the State for the development of Local bodies in the state on the basis of recommendation made by finance commission.
(4) Any other matter referred to the Commission by the President in the interest of the sound financial administration.
It is the function of the Parliament to allow to withdraw from the Consolidated Fund of India. It is the task of the Finance Ministry to oversee whether the Union Government and the State Governments are collecting taxes according to the provisions of the budget or not. Thus, only statement 2 and 3 are correct.
Ques: 6
With reference to the Finance Commission of India, which of the following statements is correct?
It encourages the inflow of foreign capital for infrastructure development.
It facilitates the proper distribution of finances among the Public Sector Undertakings.
Correct Answer:
(D)
given above is correct in this context.
Under Article 280(3) of the Constitution, the Finance Commission of India gives its suggestion in following cases:
Distribution of receipts of federal taxes between the Union and the States;
Under Article 275 aid in the revenue of the States; and
Any further topic about which the President will recommend to the Commission in the interest of economy.
The measures needed to augment the consolidated fund of a state to supplement the resources of the Panchayats and the municipalities in the state on the basis of the recommendations made by the state Finance Commission.
Ques: 7
Which one of the following is not a function of Finance Commission in India?
Correct Answer:
(D)
Devolution of Trade Tax
Income Tax and Excise Tax (now included in GST) are part of Federal taxes and the finance commission recommends the federal tax in terms of distribution between the Union and the states. The Finance Commission also determines the grants-in-aids to the States under Article 275, but the Trade Tax (now part of GST) is imposed and collected by the States whose distribution is not the subject of the Finance Commission’s functions.
Ques: 8
Main agency to resolve the fiscal disputes between the Centre and States is –
Correct Answer:
(A) Supreme Court
Supreme Court is the main agency to resolve the fiscal disputes between the centre and the states. Supreme court deals the above matter under Article 131 of the constitution of India. Finance commission core responsibility is to recommend the sharing of taxes between centre and states.
Ques: 9
Consider the following statements and select the correct answer from the code given below:
Assertion (A): State Finance Commission is a Constitutional body.
Reason (R) : Union Finance Commission cannot recommend financial assistance to Panchayats.
Code :
(A) and (R) are true and (R) is the correct explanation of
(A)
Correct Answer:
(C) is true, but (R) is false.
According to Article 243(I) of the Constitution, 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. Thus, the State Finance Commission is a Constitutional body. Article 280(3) (bb) of the Constitution lays down the Finance Commission to make its recommendations with respect to the Panchayats and Municipalities “on the basis of the recommendations made by the Finance Commission of the State.”
Ques: 10
Who recommends to the Governor the principles which should govern the distribution between the state and the panchayats of the net proceeds of the taxes and Fees leviable by the State, which may be divided between them?
Correct Answer:
(C) State Finance Commission
According to Article 243Y of the Indian Constitution, the State Finance Commission is established to review the financial position of Panchayats and recommend to the Governor the principles governing the distribution of taxes and fees between the State and the Panchayats.