Functions of Finance Commission

Distribution of ‘net proceeds’ of taxes between Center and the States, to be divided as per their respective contributions to the taxes.
Determine factors governing Grants-in-Aid to the states and the magnitude of the same.
To make recommendations to the president as to the measures needed to augment the 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.
Any other matter related to it by the president in the interest of sound finance.

Achievers IAS