Finance Commission to be constituted by November end

The government is expected to constitute the 16th Finance Commission by end of November, finance secretary T V Somanathan said. Finance Commission is a constitutional body that gives suggestions on Centre-state financial relations. It suggests, among other things, the ratio in which tax is to be divided between the Centre and states for five years, beginning April 1, 2026. “The Finance Commission is expected to be constituted by end of November because that’s the statutory requirement,” he said. Terms of Reference (ToR) for the commission is being finalised, he said. The previous Finance Commission submitted its report on November 9, 2020, for the 5 fiscals — 2021-22 to 2025-26 — to the President. The 15th Commission under N K Singh had kept the tax devolution ratio at 42 per cent — at the same level suggested by the 14th Commission. The central government accepted the report of the commission, and accordingly, the states are being given 42 per cent of the divisible tax pool of the Centre during the period 2021-22 to 2025-26. The 15th finance commission’s recommendations include the fiscal deficit, debt path for the Union and states, and additional borrowing room to states based on performance in power sector reforms.