Its primary function is the distribution of tax revenue between the Centre and the States — option 1.

The constitutional provision. Article 280 requires the President to constitute a Finance Commission every fifth year, or earlier if he thinks fit, consisting of a Chairman and four other members. Its duty is to make recommendations on :

Why the other options fail. Allocating funds to particular ministries is done by the government through the Budget, and the Budget itself is prepared by the Ministry of Finance and laid before Parliament under Article 112 — so options 2 and 4 describe the executive’s work, not the Commission’s. Option 3 is too vague: the Commission does report to the President, but its remit is the specific one of revenue sharing, not general financial advice.

How it works in practice. The 15th Finance Commission, under N. K. Singh, recommended that 41 per cent of the divisible pool of central taxes go to the States for 2021-26, and distributed that among them by a formula weighing income distance, population, area, forest and ecology, demographic performance and tax effort. Its recommendations on tax devolution are accepted by convention, though they are not legally binding.

Why it exists. The Constitution gives the Union the most elastic and productive taxes while giving the States the heaviest expenditure responsibilities — health, education, police, agriculture. The Finance Commission is the standing mechanism for correcting that imbalance, which is why it is called the balancing wheel of Indian fiscal federalism.

Hence, the answer is distribution of revenue between the Centre and the States.