UPSC Prelims Practice Questions — ‘41%’ illusion: a quiet re-engineering of India’s fiscal federal landscape

Q1. Within the Union Government, the administration of inter-se distribution of net proceeds of Union taxes among States, as recommended by the Finance Commission, is handled by which one of the following?

  • A. Department of Revenue, Ministry of Finance
  • B. Department of Expenditure, Ministry of Finance
  • C. Department of Economic Affairs, Ministry of Finance
  • D. Department of Financial Services, Ministry of Finance

Q2. The Sixteenth Finance Commission, which recommended retaining the States' share in the divisible pool at 41% for 2026-31, was constituted by the President under which one of the following provisions of the Constitution of India?

  • A. Article 270
  • B. Article 275
  • C. Article 280
  • D. Article 281

Q3. In the context of the recommendations of the Sixteenth Finance Commission, the term 'divisible pool' of central taxes refers to which one of the following?

  • A. The gross tax revenue of the Union Government, including all cesses and surcharges, shared between the Centre and the States
  • B. The net proceeds of Union taxes and duties, excluding the cost of collection, cesses and surcharges, which is shared between the Union and the States
  • C. All taxes collected by the Union and the States together, pooled and redistributed on the basis of the Finance Commission's horizontal formula
  • D. The portion of Union tax revenue retained by the Centre after transferring the constitutionally fixed share to States and Union Territories with legislatures

Q4. With reference to the horizontal devolution formula of the Sixteenth Finance Commission (2026-31), consider the following criteria and their assigned weights: 1. Contribution to GDP — 10% 2. Forest & Ecology — 10% 3. Area — 15% 4. Population (Census 2011) — 17.5% Which of the above are correctly matched?

  1. Contribution to GDP — 10%
  2. Forest & Ecology — 10%
  3. Area — 15%
  4. Population (Census 2011) — 17.5%
  • A. 1 and 2 only
  • B. 1, 2 and 4
  • C. 2, 3 and 4
  • D. 1, 3 and 4
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