Changing Financial Year to Calendar Year i.e, from existing April-March to January-December is in consideration. Latest update on changing the Financial Year of India to Jan-Dec is that, the committee formed to decided on this change of financial year will meet this Sept and give a final decision.
Why India follows April to March financial year?
This is a very easy to explain concept. In the early period of civilization, globally it was basically agrarian economy which was mostly dependent on weather and monsoons.
Therefore, crops were usually reaped in the month of march and sold in the same month. By this a country was able to define the loss and profit gained in the end of march and new process for new crop was started in the month of April. Hence financial year started in the month of April and ended in March.
During those times, Global economy was mainly dependent on trade. Trade was inturn dependent on ships and ships were dependent on sail, sail was again dependent on winds and winds are further dependent on atmospheric pressure which is directly or indirectly proportional to the weather conditions.
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Due to these weather seasons sailors were able to find the sailing routes with the help of winds. Globally financial year starts in April and ends in March.
The Indian Calendar system, called Panchang has its first month in the end of March or starting in the month of April. Almost every calendar system in the entire world is likely to have this system. This is because it is more about Geography and very less about History.
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Another reason is that, India was ruled by British for around 200 years, who followed the accounting period of April-March after the adoption of Gregorian Calendar System of accounting.
Financial Year Change Committee
The Direct Taxes Committee at its 53rd meeting held on 30th August, 2016, while considering an item ‘Constitution of a Committee by the Government of India to examine the desirability and feasibility of having a new Financial Year’, decided to request the President, ICAI to constitute a Study Group for examining the desirability and feasibility of having a new financial year and giving recommendation to the Council with regard to inputs to be given to the Committee formed by the Ministry of Finance for the said purpose.
The Committee also recommended that the group should comprise of Central Council members preferably from Research Committee, Accounting Standards Board, Auditing & Assurance Standards Board, Indirect Taxes Committee, Corporate Laws & Corporate Governance Committee, Direct Taxes Committee and Committee on Accounting Standards for Local Bodies.