In comparison to the 13th Finance Commission, the 14th Finance Commission incorporated which of the following new variables for tax devolution?

A. Fiscal discipline of states

B. Forest cover

C. Human Development Index of the state

D. 2011 population

Choose the correct answer: 

Key Points

• The 14th Finance Commission recommended an increase in the share of states in the central tax pool from 32% to 42%.
• In its formula for tax devolution, the 14th Finance Commission included forest cover and the 2011 population as new variables.
• Forest cover was included to promote ecological sustainability and recognize states' efforts towards environmental conservation.
• The 2011 population was included to reflect more recent demographic changes compared to the 1971 population, which was used earlier.

Additional Information

• Finance Commission
  • The Finance Commission is a constitutional body tasked with making recommendations on the distribution of tax revenues between the central government and the states, as well as among the states themselves.
  • It is established under Article 280 of the Indian Constitution.
  • The commission is appointed every five years by the President of India.
• 13th Finance Commission
  • The 13th Finance Commission, chaired by Dr. Vijay Kelkar, was constituted in 2007.
  • It recommended that states' share in the central tax pool be increased to 32%.
  • Key variables considered for tax devolution included population (1971), area, fiscal discipline, and income distance.
• 14th Finance Commission
  • The 14th Finance Commission, chaired by Dr. Y. V. Reddy, was constituted in 2013.
  • It recommended that states' share in the central tax pool be increased to 42%.
  • New variables for tax devolution included forest cover and the 2011 population.