In India, the financial year is the period that begins in April of each calendar year and ends in March of the next calendar year. In simple words, it is the accounting year in which you earn an income. But have you ever tried to know why the financial year starts on 1st April and ends on 31st March? Here are a few reasons for starting the fiscal year in April:
1. Inheritance from British rule
India was under British control for around 150 years, followed by the accounting period of April to March. After the East India Company started to rule, they applied the same concept in India. Hence, the financial year is from April to March in India also.
After Independence, the Indian Govt didn’t change this pattern. Thus, in a similar manner, we celebrate ‘New Year’s EVE on the last day of the year as per Western Culture.
2. Regional new year
April 1 coincided with the ‘Hindu festival’ of Vaisakha or the Hindu New Year. Hence, this may be the reason why the government also thought of starting the financial from April to March in India.
3. Agricultural country
India is an agricultural country and most of the sources of income depend primarily on crops. The income relies upon the estimation of the yields that are harvested in the period of February and March.
Thus, two months of span give the government idea of whether the revenue is going to increase/decrease. Hence it is one of the main reasons why the financial year is taken from April to March.
4. Festivals
The main festivals in India like Navratri and Diwali fall in the month of October and November, followed by Christmas in December. During these time periods, the value of sales for the retailers and value buying for the shoppers are heavy, which makes accounting, compltime-consumingnsuming.
Thus, to avoid the clash, March was preferred as the month of closure of the financial year and not December.
So, the financial year in India begins from the period of April, and March 31 is the closing of the financial year.
Other countries with an April to March financial year
India is not the only country that follows this trend of April to March. There are other countries that also follow a similar trend, and the list is:
- Canada
- United Kingdom (UK)
- New Zealand
- Hong Kong
- Japan
