State Finance Commission

A constitutional body constituted by the Governor of a state under the provisions of the Constitution to review the financial position of Panchayats and Municipalities and to make recommendations regarding the distribution of net proceeds of taxes between the state and local governments.

Why it matters

Ensures fiscal federalism at the grassroots level by providing a mechanism for the devolution of funds to local self-government institutions.
Promotes financial autonomy of local bodies by recommending principles for the assignment of taxes, duties, tolls, and fees.
Acts as an arbiter to address the vertical fiscal imbalance between state governments and local authorities.

How it is asked

Focus on Article 243-I and 243-Y, the criteria for devolution of funds, and the comparison between the role of the State Finance Commission and the Union Finance Commission in the context of decentralized governance.

In the syllabus

In the news

7th State Finance Commission tenure extension 28 July

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