A financial year is the one year period in which you earn your income. The financial year begins in the month of April and ends in the month of March of the following year. The income that is earned during the financial year is assessed and taxed in the assessment year.
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India follows the financial year from April 1st to March 31st of the following year. So, in India the calendar year and fiscal year are different, the calendar year being from 1st January to 31st December. The exact reason for this is not known, but the financial researchers have devised some theories on the financial year:
SEE ALSO: What Is Financial Year
Calendar Reform Committee 1952: the Calendar Reforms Committee was headed by renowned astrophysicist Dr. Meghnad Saha. Under his leadership, the calendar reforms committee researched the different Hindu calendars and designated a nationally accepted calendar, that could be used by the government offices and institutes. One of the main advantages of this type of calendar is that it is free from any religious and regional conflicts. This committee examined a large number of calendar systems across different parts of India and devised a calendar that was fit to be adopted as the National Calendar.
Report of Estimates Committee (1958): the Estimates Committee refers to a parliamentary committee of 30 elected members from the lower house of the parliament which is the Lok Sabha. The estimates committee is authorized with the task of examining the budget estimates of the government.
The main function of the Estimates Committee is to report expenditure. The committee suggests changes in policy and administrative framework and devises policies that can be adopted to bring efficiency in the economy. The Estimates Committee works throughout the year and for this reason, the committee is also known as ‘continuous economic committee’.
L.K. Jha Committee (1984): in the year 1984, the L.K Jha Committee had made a recommendation that the financial year start from January because of the impact of the south west monsoons on the economy. The Congress government in 1984 gave a shot at changing the financial year, appointing former RBI governor LK Jha to head a committee to explore the benefits of such a move. The idea was to ensure speedy allocation of funds during drought years.
Financial Year in India:
The current financial year is FY 2018-2019. So the financial year started on 1st April 2018 and will end on 31st March 2019.
The financial year is important as income tax returns are filed for the income earned in the financial year. Tax planning is done based on the financial year. So, the financial year matters as the assessment year starts at the end of the financial year. You pay taxes on the income earned in the financial year, in the assessment year.
The financial year in India starts from the month of April, as the Indian economy is based mainly on agriculture. The revenue depends on the value of the crops that are reaped in the month of February and March. According to the Hindu calendar, the year starts from the month of April. So the financial year in India starts from the month of April.
SEE ALSO: Why Financial Year Matters
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