Which of the following statements with regard to recommendations of the 15th Finance Commission of India are correct? I. It has recommended grants of ₹ 4,800 crores from the year 2022-23 to the year 2025-26 for incentivizing States to enhance educational outcomes. II. 45% of the net proceeds of Union taxes are to be shared with States. III. ₹ 45,000 crores are to be kept as performance-based incentive for all States for carrying out agricultural reforms. IV. It reintroduced tax effort criteria to reward fiscal performance. Select the correct answer using the code given below.
- A.I, II and III
- B.I, II and IV
- C.I, III and IV
- D.II, III and IV
Correct answer
Explanation
The correct answer is C, I, III and IV. Statement II is wrong because the 15th Finance Commission fixed the States' share at 41%, not 45%.
The 15th Finance Commission, chaired by N. K. Singh, covered 2021-22 to 2025-26. It kept the vertical share of States in the divisible pool of Union taxes at 41%, one point below the 14th Commission's 42%, because Jammu and Kashmir had become a Union Territory. It proposed performance-based grants, including ₹4,800 crore for improving school educational outcomes and ₹45,000 crore as incentives for agricultural reforms. In the formula for sharing taxes among States it brought back tax effort, with a weight of 2.5%, to reward States that collect more of their own revenue.
A is wrong because it includes statement II and leaves out IV. B is wrong because statement II is false and statement III is true. D is wrong because statement II is false and statement I is true.
Exam tip: 14th FC gave States 42%; 15th FC gave 41% and brought back tax effort (2.5%).
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