Explanation:

Finance Commission

• Article 280 provides for a Finance Commission as a quasi-judicial body.

• The Finance Commission consists of a chairman and four other members to be appointed by the president.

• They hold office for such period as specified by the president in his order and they are eligible for reappointment.

• The Constitution authorises the Parliament to determine the qualifications of members of the commission and the manner in which they should be selected.

It is required to make recommendations to the President on the following matters

• The distribution of the net proceeds of taxes to be shared between the Centre and the states and the allocation between the states, the respective shares of such proceeds.

• The principles which should govern the grants-in-aid to the states by the Centre.

• Any other matter referred to it by the President in the interests of sound finance.

15th Finance Commission

• The 15th  Finance Commission was constituted on 27 November 2017.

• Shri N.K. Singh is the chairman of 15th Finance Commission.

Criteria set by 15th Finance Commission includes

• Income distance: A state with lower per capita income will have a higher share to maintain equity among states.

• Demographic performance: States with a lower fertility ratio will be scored higher on this criterion.

• Forest and ecology: It was arrived by calculating the share of the dense forest of each state in the total dense forest of all the states.

• Tax and fiscal efforts: It is measured as the ratio of the average per capita own tax revenue and the average per capita state GDP during the three years between 2016-17 and 2018-19.

Hence option 3rd is correct.