16th Finance Commission

• The Government, with the approval of the President of India, has constituted the Sixteenth Finance Commission, in pursuance to Article 280(1) of the Constitution.
• Former NITI Aayog vice chairman and Columbia University professor Arvind Panagariya has been appointed as the chairman of the Sixteenth Finance Commission.
• Ritvik Ranjanam Pandey, former joint secretary in the Department of Revenue, is appointed as the panel’s secretary.
• 31^st October 2025 is the deadline set for the Commission to submit its recommendations, so that they can be incorporated in the Budget exercise for 2026-27.
• As per the terms of reference of the Sixteenth Finance Commission, apart from recommendations on the tax sharing formula between the Centre and the States for the five-year period beginning April 2026, it has been tasked with-
  • reviewing the present arrangements for financing Disaster Management initiatives and
  • mooting measures to augment States’ consolidated funds in order to supplement resources available with Panchayats and Municipalities.

ABOUT FINANCE COMMISSION

• Finance commissions are independent constitutional bodies with a key role to play in the division of the Centre’s net tax proceeds between Central and state governments keeping in mind the fiscal needs of the states.
• All central taxes other than those meant for states and the specific surcharges and cesses levied by the Centre form part of this divisible pool of tax revenue.
• The finance commissions decide the extent of the Centre’s revenue to be shared with the states and the formula for dividing it among states.
• The commission is a key pillar of fiscal federalism.