Reasons Why the Indian Financial Year Starts in April

Reasons Why the Indian Financial Year Starts in April

13 April, 2023

While filing your income tax returns, analysing balance sheets or just taking stock of your investments at the end of the year, you may have wondered why India's financial year starts in April, unlike January in the USA and most other western nations.

Well, here are a few reasons for the April-March fiscal year in India.

Coincidence with the Hindu Calendar

The April-March period coincides with the Hindu New Year, which is a major reason for the Indian financial year starting in April.

An interesting fact to know here is that the Hindu New Year is based on the lunar calendar. It is celebrated accordingly in different parts of the country. It usually falls in March or April, coinciding with the financial year for India.

Indian Financial Year Follows the Gregorian Calendar

The British calendar year, which India follows, is based on the Gregorian calendar. There is an interesting story behind it:

The British government chose to use the Gregorian calendar. But, before doing this, they decided to change the date of the New Year to January 1. Till then, the first day of the year had always been March 25, also known as Lady Day.

The financial year used to be from March 25 to December 31 in England and its colonies around the world. But in 1752, the English government agreed to start the new year on January 1. The accountants felt that changing the date would be unjust and rebelled against it. Hence, the financial year continued to be followed from April 1.

Coincidence with the Indian Crop Cycle

The April-March financial year aligns with the agricultural harvest cycle in India. Agriculture remains a major contributor to the Indian economy. The coincidence of the Indian crop season with the financial year is that the Indian agricultural cycle is closely tied to the monsoon season, which occurs from June to September.

The monsoon season brings much-needed rainfall to the Indian subcontinent, which is crucial for the growth of crops. The sowing of crops usually takes place in June and July, after the onset of the monsoon rains. The crops are then harvested between October and March, which coincides with the end of one financial year and the beginning of the next.

By aligning the financial year with the crop season, the government can effectively plan and allocate resources for agriculture and related activities. For example, the government can announce agricultural policies, allocate funds for subsidies and credit, and plan the procurement and distribution of food grains based on the estimated crop output for the upcoming year.

The alignment of the financial year with the crop season also benefits farmers and businesses involved in agriculture. They can make financial decisions based on the expected crop output and plan their investments and expenditures accordingly.

Overall, the coincidence of the Indian crop season with the financial year has significant implications for the agriculture sector and the economy as a whole. It has been an important factor in the development of agricultural policies and practices in India.

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​​​​​​​* The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. You are recommended to obtain specific professional advice from before you take any/refrain from any action. Investments are subject to changes in tax laws. Please contact a professional consultant for an exact calculation of your liabilities.

Click here to open your Fixed Deposit.

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