Article 280 of the Indian Constitution defines the scope of the Finance Commission:
- The President will constitute a finance commission within two years from the commencement of the Constitution and thereafter at the end of every fifth year or earlier, as deemed necessary by him/her, which shall include a chairman and four other members.
- Parliament may by law determine the requisite qualifications for appointment as members of the commission and the procedure of selection.
- The commission is constituted to make recommendations to the president about the distribution of the net proceeds of taxes between the Union and States and also the allocation of the same among the States themselves. It is also under the ambit of the finance commission to define the financial relations between the Union and the States. They also deal with the devolution of unplanned revenue resources.