BANKING AFFAIRS

Detailed explanation-1: -Ans. The Finance Commission is constituted by the President under article 280 of the Constitution, mainly to give its recommendations on distribution of tax revenues between the Union and the States and amongst the States themselves.

Detailed explanation-2: -For horizontal devolution, it has suggested 12.5% weightage to demographic performance, 45% to income, 15% each to population and area, 10% to forest and ecology and 2.5% to tax and fiscal efforts.

Detailed explanation-3: -The Finance Commission is a constitutional body, formed under Article 280 of the Indian Constitution. The main purpose of forming the Finance Commission is to give its recommendations on the distribution of Tax revenues between the Centre and the states as well as among the states.

Detailed explanation-4: -The commission was set up to give recommendations for devolution of taxes and other fiscal matters for five fiscal years, commencing 1 April 2020. The main tasks of the commission were to “strengthen cooperative federalism, improve the quality of public spending and help protect fiscal stability".