The government has initiated the process of establishing the Sixteenth Finance Commission by appointing an Officer on Special Duty for the Advance Cell on Monday. The Finance Commission, which primarily determines the formula for sharing taxes between the Central and state governments, is expected to be formed by the end of this year.

The specific Terms of Reference and the selection of commission members are anticipated to be announced shortly after the upcoming state elections. States have already provided their input regarding the commission’s Terms of Reference.

On Monday, the government appointed Ritvik Ranjanam Pandey, a 1998-batch IAS officer from the Karnataka cadre, who currently serves as the Joint Secretary in the Department of Revenue, Ministry of Finance. He has been designated as the Officer on Special Duty for the Advance Cell of the Sixteenth Finance Commission, with a rank and pay equivalent to that of an Additional Secretary. Notably, Mr. Pandey had also served as Deputy Secretary during the Thirteenth Finance Commission in 2009-10.

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The Sixteenth Finance Commission will be responsible for shaping financial policies for the five-year period commencing in 2026-27, and the resulting report is expected to be presented alongside the Budget for 2026-27.

The Finance Commission is established by the President under Article 280 of the Constitution, with its primary role being to make recommendations on the distribution of tax revenues among the Union and State governments, as well as among the states themselves. The Commission’s primary objectives include addressing disparities in the fiscal powers and spending responsibilities of the Central and State governments and achieving uniformity in the provision of public services across the various states.

The Fifteenth Finance Commission, chaired by NK Singh, submitted two reports. The initial report, which contained recommendations for the fiscal year 2020-21, was presented in Parliament in February 2020. The final report, including recommendations for the period from 2021 to 2026, was presented to Parliament on February 1, 2021.

For the 2021-26 period, the share of states in central taxes was recommended to remain at 41 percent, consistent with the allocation for 2020-21. This percentage was slightly lower than the 42 percent recommended by the Fourteenth Finance Commission for the 2015-20 period, with a 1 percent adjustment to account for the new Union Territories of Jammu and Kashmir and Ladakh.