UPSC Prelims Practice Questions — Have States gained from the 16th FC?

Q1. The Sixteenth Finance Commission of India, which submitted its report for the award period 2026-27 to 2030-31, was chaired by:

  • A. Dr. Arvind Panagariya
  • B. N. K. Singh
  • C. Y. V. Reddy
  • D. Vijay Kelkar

Q2. With reference to the recommendations of the 16th Finance Commission as compared to those of the 15th Finance Commission, consider the following statements: 1. The vertical share of States in the divisible pool of central taxes has been retained at 41%. 2. The 16th Finance Commission has introduced 'Contribution to GDP' as a criterion in the horizontal devolution formula for the first time. 3. The 'Tax and Fiscal Effort' criterion used by the 15th Finance Commission has been retained, with an enhanced weight, by the 16th Finance Commission. Which of the statements given above is/are correct?

  1. The vertical share of States in the divisible pool of central taxes has been retained at 41%.
  2. The 16th Finance Commission has introduced 'Contribution to GDP' as a criterion in the horizontal devolution formula for the first time.
  3. The 'Tax and Fiscal Effort' criterion used by the 15th Finance Commission has been retained, with an enhanced weight, by the 16th Finance Commission.
  • A. 1 and 2 only
  • B. 2 and 3 only
  • C. 1 and 3 only
  • D. 1, 2 and 3

Q3. In the context of Centre-State financial relations, the term 'divisible pool' of central taxes refers to:

  • A. The gross tax revenue collected by the Union Government in a financial year
  • B. The net proceeds of Union taxes after excluding cost of collection, cesses and surcharges, which is shareable with the States
  • C. The total of Finance Commission grants and Centrally Sponsored Scheme transfers made to the States
  • D. The aggregate of all Union taxes, including cesses and surcharges, devolved to the States under Article 275

Q4. Which one of the following is the nodal administrative authority within the Government of India for matters relating to the Finance Commission, including its constitution and the implementation of accepted recommendations?

  • A. NITI Aayog
  • B. Department of Revenue, Ministry of Finance
  • C. Department of Economic Affairs, Ministry of Finance
  • D. Finance Commission Division, Department of Expenditure, Ministry of Finance

Q5. How many criteria has the 16th Finance Commission adopted for determining the horizontal devolution of the States' share of central taxes among individual States for the award period 2026-31?

  • A. Four
  • B. Five
  • C. Six
  • D. Seven