The Centre may soon get rid of the British legacy of having April-March as the financial year and shift financial business to the calendar year.
It has set up a committee chaired by Shankar Acharya, former chief economic adviser, to look into a suitable financial year for India, taking into account the government’s budget process, agricultural cycle and private business. The committee has been asked to submit its report by December 31.
The practice of having a financial year different from the calendar year came into being in the British era when the government formulated its annual budget on the basis of anticipated revenue receipts which would determine the planned expenditure and levy of new taxes and duties during the year.
In an agricultural country like India, the main annual income depended on the unpredictable outcome of the main crops which start getting ripe in February or March. This anticipated crop-year income thus became the forecast for the likely yearly revenue receipts to the government.
In case the committee suggests a change in financial year, it will also work out on appropriate timing of change, change in tax law during transition period and the amendments that may be required in laws for arriving at such a change, a top government official said.
India is not the only country which follows April-March as the financial year. Countries like Canada, the United Kingdom, New Zealand, Hong Kong and Japan also follow the trend.
The United States, Australia and China are among the prominent countries which follow January-December as their financial year.
Changing time
India is not the only country which follows April-March as the financial year.
Countries like Canada, the United Kingdom, New Zealand, Hong Kong and Japan also follow the trend
In case the committee suggests a change in financial year, it will also work out on appropriate timing of change, change in tax law during transition period and the amendments that may be required in laws for arriving at such a change
