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Question

Q. Which of the following statements is/are correct regarding the functions of the Finance Commission?

Choose the correct answer using the codes given below:


A
1 only
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B
1 and 2 only
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C
2 and 3 only
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D
1, 2 and 3
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Solution

The correct option is A 1 only

Explanation:

  • Statement 1 correct: The Finance Commission recommends principles governing the grants-in-aid to the states by the Centre out of the consolidated fund of India.
  • Statement 2 incorrect: It recommends (and does not decide) the net tax proceeds distribution to be divided between the Centre and the states, and the allocation of the same between states. The Finance Commission has an advisory role only and the decision making authority is exercised by the Government.
  • Statement 3 incorrect: Only statutory grants are provided on the recommendations of the Finance Commission. Discretionary grants are provided by the centre on its own.

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