Mayo's Resolution of 1870
Financial decentralisation was a legislative devolution inaugurated by the Indian Councils Act of 1861. Apart from the annual grant from imperial Government, the provincial governments were authorised to resort to local taxation to balance their budgets.
This was done in context of transfer of certain departments of administration, such as medical services, education and roads, to the control of provincial governments. This was the beginning of local finance.
The various provincial governments such as in Bengal, Madras, NorthWestern Province, Punjab, passed municipal acts to implement the policy outlined.
Royal Commission on Decentralisation (1908)
Pointing out the lack of financial resources as the great stumbling block in the effective functioning of local bodies, the commission made the following recommendations.
It emphasised that village panchayats should be entrusted with more powers like judicial jurisdiction in petty cases, incurring expenditure on minor village works, village schools, small fuel and fodder reserves, etc. The panchayats should be given adequate sources of income.
It emphasised the importance of sub-district boards to be established in every taluka or tehsil, with separate spheres of duties and separate sources of revenue for sub-district boards and the district boards.
It urged the withdrawal of existing restrictions on their powers of taxation, and also, the stoppage of regular grants-in-aid from provincial governments except for undertaking large projects.
The municipalities might undertake the responsibility for primary education and, if willing, for middle vernacular schools, otherwise the Government should relieve them of any charges in regard to secondary education, hospitals, relief, police, veterinary works, etc.