The finances allocated to Panchayats for their functioning and development activities are governed by various provisions in the Indian Constitution, particularly under Part IX (Articles 243 to 243O).
- Article 243G:
- Article 243G of the Indian Constitution outlines the powers and functions of Panchayats, including their financial powers.
- It empowers Panchayats to levy, collect, and appropriate taxes, duties, tolls, and fees within the areas of their jurisdiction as may be assigned to them by the state legislature.
- Panchayats can also receive funds from the state government and the Central government through grants-in-aid, allocations, and other financial assistance mechanisms.
- Grants-in-Aid:
- State governments are mandated to provide funds to Panchayats for their functioning and for carrying out various development activities.
- These funds are typically provided through grants-in-aid, which may be unconditional or subject to certain conditions as specified by the state government.
- Grants-in-aid are an important source of revenue for Panchayats, especially in states where they have limited revenue-raising powers.
- State Finance Commission (SFC):
- The State Finance Commission is a constitutional body established under Article 243I of the Indian Constitution.
- It is responsible for recommending the principles governing the distribution of finances between the state government and the Panchayats, as well as among different tiers of Panchayats.
- The recommendations of the State Finance Commission are binding on the state government.
- Article 280:
- Though not specific to Panchayats, Article 280 of the Indian Constitution provides for the establishment of a Finance Commission at the national level (Finance Commission of India) and at the state level.
- The Finance Commission of India recommends the distribution of tax revenues between the Central government and the state governments, which indirectly impacts the finances available for Panchayats.
Overall, the finances allocated to Panchayats are determined by a combination of their own revenue-raising powers, grants-in-aid from the state and Central governments, and recommendations of the State Finance Commission. These financial resources are essential for Panchayats to carry out their functions and implement various development programs at the grassroots level.
