Article 243Y Simplified: Finance Commission

Official Text

(1) The Finance Commission constituted under article 243I shall also review the financial position of the Municipalities and make recommendations to the Governor as to— (a) the principles which should govern— (i) the distribution between the State and the Municipalities of the net proceeds of the taxes, duties, tolls and fees leviable by the State, which may be divided between them under this Part and the allocation between the Municipalities at all levels of their respective shares of such proceeds; (ii) the determination of the taxes, duties, tolls and fees which may be assigned to, or appropriated by, the Municipalities; (iii) the grants-in-aid to the Municipalities from the Consolidated Fund of the State; (b) the measures needed to improve the financial position of the Municipalities; (c) any other matter referred to the Finance Commission by the Governor in the interests of sound finance of the Municipalities. (2) The Governor shall cause every recommendation made by the Commission under this article together with an explanatory memorandum as to the action taken thereon to be laid before the Legislature of the State.

Simple Meaning

Article 243Y mandates that the State Finance Commission (constituted under Article 243I) must also review the financial position of Municipalities. It recommends to the Governor how to share tax revenues between the state and municipalities, determine local taxes, allocate grants-in-aid, and improve municipal finances. The report must be tabled in the State Legislature.

Explain Like Ten

Every five years, a special financial team (the State Finance Commission) is called in to check the city's money. They suggest to the Governor how to divide tax money fairly between the state government and city councils.

Student Mode

Article 243Y mandates that the State Finance Commission (SFC) constituted under Article 243I must also review the financial position of Municipalities. The SFC makes recommendations to the Governor regarding: (a) distribution of net tax proceeds between the State and Municipalities, (b) determination of taxes assigned to Municipalities, (c) grants-in-aid, and (d) measures to improve municipal finances. The Governor must table these recommendations in the State Legislature.

Example

The State Finance Commission of Tamil Nadu reviews municipal records and recommends that the Governor allocate 8% of the state's tax revenue to urban local bodies. The Governor then tables this recommendation in the State Assembly for implementation.

Key Takeaway

Article 243Y ensures independent, structured fiscal devolution to urban local bodies through periodic State Finance Commission audits and reviews.

FAQs

Does the Union Finance Commission play a role in municipal finances?

Yes. Under Article 280(3)(c), the Union Finance Commission recommends measures to augment the State Consolidated Fund to supplement the resources of Municipalities based on the recommendations of the State Finance Commission.

To whom does the State Finance Commission submit its municipal reports?

The State Finance Commission submits its report and recommendations to the Governor, who is constitutionally required to lay them before the State Legislature.

Quiz

Which body is responsible for reviewing the financial position of Municipalities under Article 243Y?

Answer: The State Finance Commission

To whom does the Governor present the State Finance Commission's recommendations?

Answer: The State Legislature

Related Topics

• Article 243I
• Article 280