Master four maps: three public funds; tax distribution; Finance Commission; grants and borrowing. Read the constitutional rule before current percentages or amounts, because Commission awards and budgets change. Never confuse Union Finance Commission under Article 280 with State Finance Commission under Article 243-I.
2. Article map
Articles
Subject
Key cue
265–267
Authority of law; Consolidated Fund, Public Account, Contingency Fund.
Levy, collection and appropriation may belong to different levels.
275, 282
Grants.
Constitutional grants versus broad public-purpose grants.
279, 280–281
Net proceeds and Finance Commission.
CAG certifies net proceeds; President constitutes Commission.
279A
GST Council.
Cooperative recommendation forum, not Finance Commission.
292–293
Union and State borrowing.
State borrowing is within India; Union consent may be required.
243-I, 243-Y
State Finance Commission.
Local-body finances every five years.
3. Three State public funds
Fund
What enters
Withdrawal
Consolidated Fund of State — Article 266(1)
All State revenues, loans raised, and repayments of loans given.
Only in accordance with law and appropriation process under Constitution.
Public Account — Article 266(2)
Other public money received by/on behalf of State, such as provident funds, deposits and reserve funds.
Government acts largely as banker/trustee; legislative appropriation is not required in the same manner.
Contingency Fund — Article 267(2)
Imprest created by State Legislature by law.
At Governor's disposal for unforeseen expenditure pending later legislative authorisation and recoupment.
4. Tax-distribution architecture
Article
Route
Meaning
268
Union levies; States collect and appropriate specified duties.
Legislative source and revenue recipient differ.
269
Union levies/collects specified inter-State taxes and assigns to States.
Read separately from GST under 269A.
269A
Inter-State GST levied/collected by Union and apportioned between Union and States.
Imports are treated as inter-State supply for this purpose.
270
Shareable Union taxes form divisible pool, subject to express exclusions.
Vertical share: Union–States; horizontal share: among States.
271
Parliament may impose surcharge for Union purposes on specified taxes/duties.
Surcharge proceeds go wholly to Union; GST under Article 246A is excepted.
5. Vertical and horizontal fiscal imbalance
Union has major broad tax bases while States carry extensive service-delivery responsibilities: this is vertical imbalance. States also differ in population, income, area, demography and fiscal capacity: this is horizontal imbalance. Tax devolution and grants attempt to reconcile autonomy, equity and national standards. A Finance Commission recommends the shareable-tax distribution first between Union and all States, then among States by an approved formula.
6. Finance Commission
Feature
Rule
Constitution
President constitutes every fifth year or earlier.
Composition
Chairperson and four other members appointed by President; Parliament determines qualifications/selection.
Tax devolution
Recommends Union–State distribution of divisible net proceeds and allocation among States.
Recommends measures to augment State Consolidated Fund for Panchayats and Municipalities based on State Finance Commission recommendations.
Other
Any matter referred by President in interests of sound finance.
Report
President lays recommendations and action-taken explanatory memorandum before each House of Parliament under Article 281.
7. Article 275 and Article 282 grants
Point
Article 275
Article 282
Nature
Constitutional grants-in-aid from Consolidated Fund of India to States determined to need assistance.
Union or State may make grants for any public purpose.
Competence
Operates under specific constitutional scheme and Finance Commission principles.
Permitted even when grant purpose lies outside grantor's legislative field.
Special focus
Includes provisions for Scheduled Tribes and Scheduled Areas in specified circumstances.
Broad basis often supporting schemes and discretionary transfers.
8. GST Council and Finance Commission compared
Point
GST Council — 279A
Finance Commission — 280
Chair
Union Finance Minister.
Chairperson appointed by President.
Members
Union and State/UT ministerial representatives.
Chairperson plus four members.
Main work
Recommendations on GST rates, exemptions, model laws, apportionment principles and related matters.
Tax devolution, grants and fiscal augmentation.
Frequency
Standing federal forum.
Constituted every fifth year or earlier.
Voting
Three-fourths weighted majority; Union weight one-third and all States together two-thirds; quorum one-half.
Determines own procedure subject to law; no Article 279A weighted formula.
9. State Finance Commission is different
Point
State Finance Commission
Article
243-I; municipal review applied through 243-Y.
Constitution
Governor constitutes within one year of 73rd Amendment commencement and every fifth year thereafter.
Work
Reviews Panchayat finances and recommends State-local tax sharing, assignment, grants and financial improvement; also municipal finances.
Report
Governor lays recommendations and action-taken memorandum before State Legislature.
Link to Union FC
Article 280 Commission considers measures to augment State fund for local bodies on this recommendation base.
10. Borrowing and fiscal safeguards
Article
Rule
292
Union may borrow on security of Consolidated Fund of India within limits fixed by Parliament and may give guarantees.
293(1)
State executive may borrow only within India on security of State Consolidated Fund, within limits fixed by State Legislature, and give guarantees.
293(3)
A State with an outstanding Union loan or Union-guaranteed loan cannot raise a loan without Union consent.
293(4)
Union consent may carry conditions.
12. Bihar relevance
Area
Bihar application
Funds
Bihar budget accounts are organised through State Consolidated Fund, Contingency Fund and Public Account under Articles 266–267.
Transfers
Bihar receives its constitutional share of divisible Union taxes and may receive grants; current amounts must be checked in current Finance Commission report and State budget.
Local bodies
Bihar State Finance Commission recommendations form the State-level basis for Panchayat and municipal resource review.
Borrowing
Bihar borrowing remains subject to Article 293 and applicable fiscal-responsibility law; yearly limits are current-data questions.
13. Short timeline
15. Official PYQ status
No question is labelled official PYQ because full official wording/options were not verified. These are original BPSC-style questions.