When it comes to accounting, the financial year in India begins in April and concludes in March of the following year. The year in which you make a profit is known as the accounting year. However, have you ever thought to investigate why the fiscal year begins on April 1 and concludes on March 31? Starting the fiscal year at the beginning of April has a number of advantages, including:
For more than 15 years, the British administration in India was in charge, and they used the April-to-March accounting cycle. After the country's independence, the Indian government used the same strategy. Before then, the Indian fiscal year ran from May 1 to April 30 in order to coincide with harvest time.
The Hindu holiday of Vaisakha, or the Hindu New Year, is likewise linked to this system. Month 1 in the Hindu calendar will begin around March-April. For this reason, it's possible that the Indian government also considered switching to an April-to-March fiscal year.
In addition to this, the financial year is timed to coincide with the growing season. Two-thirds of India's population lives off the land, making it predominantly an agricultural country. The revenue is derived from an estimation of the February and March harvest's yields.
That resulted in a new method for new crops beginning in April, which helped to quantify the losses and gains of the previous month's harvests. Because of this, a two-month period offers the government an idea of whether revenues will rise or fall. Consequently, the fiscal year spans from April through March as a result of this fact.
Festivities like Navratri and Diwali, as well as the Christmas season, take place in India throughout October and November. These are the best periods for both retailers and consumers to make money. End-of-year accounting may be tough in the face of such large expectations.
The financial year ended in March rather than December to avoid a clash. Thus, the Indian financial year begins on April 1 and concludes on March 31.
That being said, it is important to highlight that the Constitution does not allow for the fiscal year to begin in April. The General Provisions Act of 1897, on the other hand, ensures the survival of this practise. In order to avoid confusion, private enterprises and organizations are not obligated to keep their records in accordance with a fiscal year set forth by the government.
Even though India follows the Gregorian calendar, they aren't the only ones. It's not only North America that follows this trend; other countries like the United Kingdom and New Zealand also do.
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