The currently followed Financial Year of April to March is a legacy left behind by the Britishers, which was a colonial system adopted by them in 1867 to align India’s financial system with the British Empire. James Wilson of East India Company introduced this concept of 1st April to 31st March as a Financial Year in the Colonial India. He was the first Finance Member of the Council of the British who gave the first budget speech on 18th February 1860. The financial data and estimates were sent across to England for review that helped in simplifying administration for the British East India Company.
This Financial Year cycle was chosen by the Britishers without any reference to India’s national culture or traditions nor considering the Indian Legislators’ convenience. The present financial year is also argued to be inconvenient when it comes to optimum utilization of data of the prevalent monsoon season.
The Government on 1st May 1984 set up L.K. Jha Committee to reconsider to change the cycle. Major factor for changing the financial year was to take into consideration and effectively use information about monsoons for proper estimation of receipts and expenditures, its optimal utilization, convenience of the Members of Parliament / State Legislatures in touring their constituencies, apart from other factors like taxation systems, crop periods and desirability of achieving uniformity in accounting years followed by others.
Agriculture, being an important factor in India, is largely dependent on Monsoon period between June & September. The time of budget presentation in February makes it difficult for Government to include a realistic forecast or data regarding agriculture, since the monsoon period runs from June to September. Change in fiscal year can give better chance at these predictions and can include them in budget formulations, as it would be possible to include Rabi, Kharif, Zaid crop seasons’ data while making the budget.
Generally, developed nations follow the system of January – December as their fiscal year. The change in our country’s financial year pattern would simplify and result in saving time & effort in aligning, consolidating, sharing & effective use of data & statistics, in view of the globalization of various economies.
Some of the Demerits of Such a Change are:
- Shifting of the Budget Presentation,
- Change in the Parliament sessions,
- Reorganizing Tax infrastructure and its various laws,
- Deciding on the Tax Assessment year, etc.
This definitely would be a one-time cost for Government as well as the Companies.
The Shankar Acharya Committee constituted in July 2016 was in favor of changing the fiscal year to January-December. It may be that the implementation of the Goods and Services Tax and the disturbance caused by it might have forced the government to drop the idea then.
Keeping in mind the kind of developments that have taken place in transportation, information technology and communication infrastructure over the past decade, it should not be a major issue if the Government decides to change the fiscal year. One must be positive, as we very well know that “Change is the only constant”!
