As per provisions given in Article 280 of the Constitution of India, the President of India can constitute the Finance Commission and give its recommendations on the distribution of tax between the State Governments and Union Government and also amongst the states themselves. You can read about the Fiscal Responsibility & Budget Management (FRBM) Act in the given link.
As per the rules, the chairman who is selected as the Finance Commissioner should have experience in public affairs and four other members who are qualified in economics, financial matters, administration etc. The first finance commission was constituted on 6th April, 1952 under the chairmanship of Shri K.C. Neogy.
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