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Which of the following best describes the constitutional status of the Finance Commission of India?

1. It functions as a permanent body with continuous existence.
2. It is constituted periodically by the President to make recommendations on fiscal distribution.
3. It has the power to levy and collect taxes on behalf of states.
4. It is a statutory body created by an Act of Parliament.

Correct answer: It is constituted periodically by the President to make recommendations on fiscal distribution.

Solution

The Finance Commission is a constitutional body under Article 280, and it is constituted by the President every five years or earlier as needed. It recommends the distribution of tax revenues and grants between the Union and the States.

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