Why does the financial/fiscal year start from 1st April?

The financial year runs from April to March. Companies present their yearly account for the same period. The government also presents its budget for April – March. Even a country’s citizens pay their income tax during April – March. Have you ever thought why the financial year starts from April – March? Why it can’t be modest like January to December?

Wouldn’t it be a lot more convenient if it concurred with the calendar year? Many people don’t resembling to write two years every time they define any particular financial year like 2011 – 12. It isn’t like any law in India only, but there are a lot of countries where the fiscal year is from April to March. Their governments run between April – March. Countries like Canada, United Kingdom, New Zealand, Japan and Hong Kong are also follow the same.
In the book of accounts there is not a single explanation of why the financial year is defined like that but we have noted some may possibly be explanations.

The Income Tax Act
The current income tax act was sanctioned in 1961, and it came into effect from April 1, 1962. This could be the major reason why our financial year begins on April 1.

Leisure Activity
The process of maintaining and preparing accounts and taxes is very time taking. During the year end in month of December there are festivals like Christmas and New Year. This is the time when people do a lot of shopping and spend time with family and friends. In most of the Christian regions have public holidays for a week or more. So it is an obvious thing that no one would love to spend their time doing accounting and documentation work.

Busy Businesses
The end of the calendar year has festivals when people do lots of shopping for themselves and for the dear ones. Due to high demand and supply volume it could be much difficult to maintain the stock lying in warehouses and also for solo owners it is not possible to spare time for accounting work. So, to not load everyone with extra work, the financial year ends in March, when the activity and inventory levels are normal.

British Inheritance
The British followed the April to March system for financial accounting. Also, under the old Julian calendar that Britain followed, April 1st loosely coincided with an Indian month that is considered the New Year in many Indian cultures. India was ruled by the British for a long time, and maybe that’s the reason we follow the same old trend of April – March financial year system,

Agricultural season
India is largely an agrarian economy and the citizen of a large populated country still depends on agriculture. Therefore the accounting system should be in according with the crop pattern. Major crop seasons starts in April. Years before India’s foremost part of taxes were from the agriculture. So the government prepared its annual budget keeping these crop patterns in mind.

While the exact reason remains unknown like the mystery of evolution of mankind, there is no denying the fact that most countries’ financial year differ from the calendar year.

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Pratik Patel, BDM
Shreeji Ceramic