Which of the following is incorrect about Finance Commission in India?

Finance Commission is set up every ten years.

The correct answer is Option 1: Finance Commission is set up every ten years.

Finance Commission is set up every ten years — Incorrect. The Finance Commission is constituted by the President of India every five years (or earlier if required), not every ten years. Its main role is to recommend the distribution of financial resources between the Centre and the States.

Option 2: Its purpose is to decide on sharing of tax revenues between Centre and States — Correct. One of the major functions of the Finance Commission is to recommend how tax revenues should be divided between the Union and the States.

Option 3: It is an important mean of maintaining centre-state relations — Correct. The Finance Commission helps maintain financial balance between the Centre and States and strengthens cooperative federalism.