SSC CGL Finance – Finance Commission – Level 2 · Exam Level · Paper III Sprint

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SSC CGL Finance – Finance Commission – Level 2 · Exam Level · Paper III Sprint – 15 questions, subject: Finance & Economics (Tier II Paper III). Every question has the correct answer with a one-line explanation; tap "Show Answer". Free practice for TNPSC, UPSC, SSC, Bank and RRB exams – Shanmugam IAS Academy, Coimbatore.

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1.  
Statement-based
I. The Finance Commission determines its own procedure.
II. Members of the Finance Commission are eligible for reappointment.
Which is/are correct?

Correct Answer: D [Both I and II]

Explanation:

Art. 280(4); s. 6 of the 1951 Act.

2.  
Gross tax revenue ₹ 20 lakh crore; cesses and surcharges ₹ 2.5 lakh crore; cost of collection ₹ 0.5 lakh crore. The divisible pool is:

Correct Answer: B [₹ 17 lakh crore]

Explanation:

Answer: ₹ 17 lakh crore. 20 − 2.5 − 0.5 = 17.

3.  
With that pool of ₹ 17 lakh crore, the States' share at 41% is:

Correct Answer: C [₹ 6.97 lakh crore]

Explanation:

17 × 0.41 = 6.97 (40% = 6.8, + 1% = 0.17).

4.  
Match the followingMatch:
P. Art. 270 Q. Art. 275 R. Art. 281 S. Art. 282
1. Taxes levied and distributed between Union and States 2. Grants to States in need of assistance 3. FC recommendations laid before Parliament 4. Grants for any public purpose

Correct Answer: A [P-1, Q-2, R-3, S-4]

Explanation:

Answer: P-1, Q-2, R-3, S-4. As in the Constitution.

5.  
Assertion–Reason
A: A new surcharge on income tax adds nothing to the States' tax devolution.
R: Surcharges under Article 271 are kept wholly by the Union and are outside the divisible pool.

Correct Answer: B [Both A and R are true and R explains A]

Explanation:

Answer: Both A and R are true and R explains A. Art. 271 and Art. 270(1).

6.  
Data tableUsing the Fifteenth FC's weights, a fictional State's criterion shares (%) are: population 8, area 6, forest 4, income distance 10, tax effort 8, demographic performance 6. Its final share is:

Correct Answer: D [7.95%]

Explanation:

1.2 + 0.9 + 0.4 + 4.5 + 0.2 + 0.75 = 7.95.

7.  
Which criterion carried the highest weight in the Fifteenth FC's horizontal formula?

Correct Answer: A [Income distance (45%)]

Explanation:

Answer: Income distance (45%). PIB, 01-02-2021.

8.  
Two-quantity comparison
Quantity I: weight of population in the Fifteenth FC's formula
Quantity II: weight of area in the same formula

Correct Answer: C [Quantity I = Quantity II]

Explanation:

Answer: Quantity I = Quantity II. Both are 15%.

9.  
Which horizontal criterion of the Sixteenth FC is new, rewarding States for their contribution to growth?

Correct Answer: C [The State's contribution to GDP]

Explanation:

Report Vol. I and Explanatory Memorandum.

10.  
Reverse questionIts recommendations decide each State's share of the Union's divisible pool, and the President lays them before Parliament with an explanatory memorandum. The body is the:

Correct Answer: D [Finance Commission]

Explanation:

Answer: Finance Commission. Arts. 280–281.

11.  
Spot My Mistake“The Finance Commission is constituted by the President every fifth year under Article 281.” Correct version:

Correct Answer: A [It is constituted under Article 280; Article 281 only lays its recommendations before Parliament]

Explanation:

Answer: It is constituted under Article 280; Article 281 only lays its recommendations before Parliament. 280 makes, 281 shows.

12.  
The divisible pool is ₹ 25 lakh crore. If the States' share were cut from 42% to 41%, the States would get less by:

Correct Answer: C [₹ 25,000 crore]

Explanation:

One point = 25 lakh crore ÷ 100 = 0.25 lakh crore.

13.  
Arrange in orderArrange the steps of finding a State's devolution: (1) subtract cesses and surcharges (2) start from gross tax revenue (3) apply the vertical share (4) subtract the cost of collection (5) apply the State's horizontal share

Correct Answer: B [2, 1, 4, 3, 5]

Explanation:

Gross → less cess/surcharge → less cost → 41% → formula.

14.  
The provisos to Article 275(1) provide grants for:

Correct Answer: D [welfare of Scheduled Tribes and raising the level of administration of Scheduled Areas]

Explanation:

Answer: welfare of Scheduled Tribes and raising the level of administration of Scheduled Areas. Text on fincomindia.nic.in.

15.  
The Sixteenth FC's Terms of Reference allowed it to review the financing of disaster management initiatives with reference to the:

Correct Answer: B [Disaster Management Act, 2005]

Explanation:

Answer: Disaster Management Act, 2005. ToR, S.O. 5533(E).

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