What are the functions of the Finance Commission?

The functions of the Finance Commission are to make recommendations to the President on

• The distribution between the Union and the States of the net proceeds of taxes which are to be, or maybe, divided between them and the allocation between the States of the respective shares of such proceeds; 
• The principles which should govern the grants-in-aid of the revenues of the States out of the Consolidated Fund of India;
• The measures needed to augment the Consolidated Fund of a State to supplement the resources of the Panchayats in the State on the basis of the recommendations made by the Finance Commission of the State;
• The measures needed to augment the Consolidated Fund of a State to supplement the resources of the Municipalities in the State on the basis of the recommendations made by the Finance Commission of the State;
• Any other matter referred to the Commission by the President in the interests of sound finance.

 Further Reading:

• Finance Commission of India
• Indian Polity Notes