The Central Finance Commission is a vital constitutional body established under Article 280 of the Indian Constitution. It is constituted by the President of India every five years (or earlier if necessary) to define the financial relations between the Central Government and the State Governments.

The main functions and objectives of the commission include:

• Tax Distribution: Recommending how the net proceeds of taxes collected by the Union should be shared with the States and how that share is distributed among the different States.
• Grants-in-aid: Determining the principles that should govern the grants-in-aid of the revenues of the States out of the Consolidated Fund of India.
• Support for Local Bodies: Suggesting measures to augment the Consolidated Fund of a State to supplement the resources of Panchayats and Municipalities.
• Other Financial Matters: Reviewing any other matter referred to the Commission by the President in the interest of sound finance.

• In short, the Central Finance Commission plays a central role in maintaining the balance of Fiscal Federalism in India.