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    Question

    Which of the following is correct about Finance

    Commission of India? Statement 1 : The commission divides tax proceeds between central and state governments  Statement 2 : Make recommendations for providing funds to states to supplements the resources of Panchayats and municipalities Statement 3 : The commission has powers of the civil court as per the Court of Civil Procedure, 1908.
    A Statement 1 only Correct Answer Incorrect Answer
    B Statement 1 and 2 only Correct Answer Incorrect Answer
    C Statement 1 and 3 only Correct Answer Incorrect Answer
    D Statement 2 and 3 only Correct Answer Incorrect Answer
    E All are correct Correct Answer Incorrect Answer

    Solution

    The Finance Commission is a Constitutional body formulated under Article 280 of the Indian Constitution. It is constituted every five years by the President of India to review the state of finances of the Union and the States and suggest measures for maintaining a stable and sustainable fiscal environment.  The Commission has the power to determine their own procedure and has all powers of the civil court as per the Court of Civil Procedure, 1908. Functions of the commission: 1. Distribution of net proceeds of taxes between Centre and the States, to be divided as per their respective contributions to the taxes. 2. Determine factors governing Grants-in Aid to the states and the magnitude of the same. 3. To make recommendations to president as to the measures needed to augment the Consolidated Fund of a State to supplement the resources of the panchayats and municipalities in the state on the basis of the recommendations made by the Finance Commission of the state.

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