Finance Commission review of Panchayat finances to set principles for tax distribution and grants in aid to local bodies. A State-level Finance Commission must be constituted by the Governor to review the financial position of Panchayats and recommend principles for distribution of State tax proceeds between State and Panchayats, allocation among Panchayat levels, assignment of taxes and grants in aid. The Legislature may regulate the Commission's composition and powers, the Commission sets its own procedure, and the Governor must lay the Commission's recommendations and explanatory memorandum before the Legislature.