The Government of India, with the approval of the President of India, has constituted the Sixteenth Finance Commission, in pursuance to Article 280(1) of the Constitution.

Dr Arvind Panagariya, former Vice-Chairman, NITI Aayog, and Professor, Columbia University will be the Chairman.  Members of the Sixteenth Finance Commission would be notified separately. Shri Ritvik Ranjanam Pandey has been appointed as Secretary to the Commission.  Detailed terms of reference for Sixteenth Finance Commission have also been spelt out in the notification issued today.

The Sixteenth Finance Commission shall make recommendations as to the following matters, namely: — 

(i) The distribution between the Union and the States of the net proceeds of taxes which are to be, or may be, divided between them under Chapter I, Part XII of the Constitution and the allocation between the States of the respective shares of such proceeds;

(ii) The principles which should govern the grants-in-aid of the revenues of the States out of the Consolidated Fund of India and the sums to be paid to the States by way of grants-in-aid of their revenues under article 275 of the Constitution for the purposes other than those specified in the provisos to clause (1) of that article; and

(iii) The measures needed to augment the Consolidated Fund of a State to supplement the resources of the Panchayats and Municipalities in the State on the basis of the recommendations made by the Finance Commission of the State.

The Sixteenth Finance Commission may review the present arrangements on financing Disaster Management initiatives, with reference to the funds constituted under the Disaster Management Act, 2005 (53 of 2005), and make appropriate recommendations thereon.

The Sixteenth Finance Commission has been requested to make its report available by 31^st day of October, 2025 covering a period of five years commencing on the 1^st day of April, 2026.

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Finance Commission constitution directs allocation of divisible tax proceeds and grants in aid and frameworks for local government financing. A Finance Commission constituted under Article 280 is to recommend distribution of divisible tax proceeds between the Union and States and allocation among States, set principles for grants in aid from the Consolidated Fund of India including payments under Article 275, recommend measures to augment State Consolidated Funds to support Panchayats and Municipalities, and may review Disaster Management financing under the Disaster Management Act, 2005; the Commission has a Secretariat head and is to submit a report covering a five year period.