The Finance Commission: constituted every fifth year under Article 280, and the three matters it must report on

Background

As per clause (1) of article 280 of the Constitution, the Finance Commission is to be constituted every fifth year or earlier.
A Finance Commission normally takes about two years to make its recommendations.
Its terms of reference require recommendations on three matters. The first is the distribution between the Union and the States of the net proceeds of taxes which are to be, or may be, divided between them under Chapter I, Part XII of the Constitution, and the allocation between the States of their respective shares.
The second is the principles which should govern the grants-in-aid of the revenues of the States out of the Consolidated Fund of India, and the sums to be paid to the States by way of grants-in-aid of their revenues under article 275 of the Constitution.
The third is the measures needed to augment the Consolidated Fund of a State to supplement the resources of the Panchayats and Municipalities in that State, on the basis of the recommendations made by the Finance Commission of the State.
The five-year rhythm has slipped in practice: the Eleventh Finance Commission was constituted six years after the Tenth, and the Fourteenth Finance Commission was constituted five years and two months after the Thirteenth.
An Advance Cell was formed in the Ministry of Finance to oversee preliminary work, pending the formal constitution of the Sixteenth Finance Commission.