The correct answer is (a) 5 years.
The Finance Commission is a statutory body constituted by the President of India every five years to review the financial relations between the Union and the States and to make recommendations to the President on the following matters:
- The distribution of the net proceeds of taxes between the Union and the States;
- The principles which should govern the grants-in-aid of the revenues of the States out of the Consolidated Fund of India;
- The measures needed to augment the Consolidated Fund of a State to enable it to meet the expenditure on schemes of development;
- The allocation of the shares of the Union in the net proceeds of taxes to be distributed among the States;
- The principles which should govern the grants-in-aid of the revenues of the Union Territories by the Central Government; and
- Any other matter referred to the Commission by the President in the interests of sound finance.
The Finance Commission is appointed by the President on the advice of the Prime Minister. The Commission consists of a Chairman and four other members, who are appointed by the President on the recommendation of the Prime Minister. The Chairman of the Finance Commission is usually a retired judge of the Supreme Court or a retired Chief Justice of a High Court. The other members of the Commission are usually experts in the fields of economics, finance, and public administration.
The Finance Commission submits its report to the President, who places it before the Parliament. The Parliament is not bound to accept the recommendations of the Finance Commission, but it usually does so. The recommendations of the Finance Commission are implemented by the Central Government and the State Governments.
The Finance Commission has played a significant role in the development of the Indian economy. Its recommendations have helped to improve the financial relations between the Union and the States, and have also helped to augment the resources of the States. The Finance Commission has also helped to improve the quality of life of the people of India.