It's March 31, arguably the most important date for India's financial system. It serves as the final day of the financial year for everyone, from corporations to the government and the average citizen.
India's financial year stretches from April 1 to March 31 of the subsequent year. During this period, income, expenses, profits and losses for accounting, budgeting and taxation are tracked.
It helps both individuals and organisations assess their financial position and calculate the taxes they owe to the government.
But why does India follow this April-to-March cycle instead of the calendar year?
The system has its roots in erstwhile British rule, but the story begins even before that in Europe.
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According to SCB Solutions, before the modern calendar was adopted, much of Europe followed the Julian calendar. But due to inaccuracies in tracking time, a new system, the Gregorian calendar, was introduced in the 16th century. The British finally adopted it in 1752, but there was a gap of several days compared to the rest of Europe.
At the time, tax collection in Britain was linked to a date known as “Lady Day,” which fell on March 25 under the older calendar. So, to avoid losing tax revenue due to the shift in dates, British authorities adjusted their financial year. Over time, this moved the tax year to begin in early April.
UK's tax year runs from April 6 to April 5 of the following year, even today.
When the British established their rule in India, they brought this financial structure with them. For administrative ease, India modified the system slightly to run from April 1 to March 31.
A Link To India's Agricultural And Cultural Cycle
Apart from colonial influence, India's own economic structure also supported this timeline. The country has been largely dependent on agriculture. The harvest season in many regions ends around March which makes it a practical point to assess income and production.
The government plans its budget and policies for the new financial year that starts from April 1.
Apart from this, there is a cultural connection as well. In many parts of India, a new year is usually marked in the month of April according to Hindi calendar.
How Is India Different From Other Countries?
But not all countries follow this system. In many parts of the world, the financial year runs from January 1 to December 31. Countries such as India and the UK continue to follow a different timeline.
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