According to Section 2(41) of the Companies Act, 2013,
(hereinafter referred to as the 'New Act') "financial
year", in relation to any company or body corporate, means the
period ending on the 31st day of March every year, and where it has
been incorporated on or after the 1st day of January of a year, the
period ending on the 31st day of March of the following year, in
respect whereof financial statement of the company or body
corporate is made up, provided that on an application made by a
company or body corporate, which is a holding company or a
subsidiary of a company incorporated outside India and is required
to follow a different financial year for consolidation of its
accounts outside India, the Tribunal may, if it is satisfied, allow
any period as its financial year.
Financial year followed by other countries
The Financial year followed by The United States of America is
from October 1 to September 30, while China follows the calendar
year i.e. January 1 to December 31. Apart from India, countries
that follow the April 1 to March 31 include the United Kingdom, New
Zealand, Japan and Hong Kong, among others.
Change of the Financial Year in India
The government has constituted a committee headed by former
chief economic advisor Shankar Acharya to study the pros and cons
of adopting a new financial year. The other members of the
committee includes former cabinet secretary Mr. KM Chandrasekhar,
former finance secretary of Tamil Nadu Mr. PV Rajaraman and senior
fellow at the Centre for Policy Research Mr. Rajiv Kumar.
The committee shall examine in detail the effect of the change
in financial year on various sectors and shall submit its report by
December 31, 2016.
Benefits and Drawbacks
Since most of the major developed countries around the world
follow January to December, this proposed change would align
India's accounting system with the practice of other countries
and also enable international data comparisons. This could also
enable faster implementation of government policies and projects if
they are taken up from the beginning of the calendar year.
However, according to Mr D S Rawat, Secretary General, Assocham
India "In any case, different countries follow different
financial years and there is no standard accounting practice for
the world. So, change to any other calendar would not result into
India aligning itself with the world. Besides, even within the
domestic economy, there is no tangible reason for the unnecessary
change for which the government has set up a committee to
deliberate whether there is a need for a shift."
The terms of reference (ToR) of the Committee are as under:
Examine the merits and demerits of various dates for the
commencement of the financial year including the existing date,
taking into account, inter-alia, the following:
1. The genesis of the current financial year and the studies
made in the past on the desirability of change in financial
2. The suitability of the financial year from the point of view
a. correct estimation of receipts and expenditure of Central and
b. the effect of the different agricultural crop periods;
c. the relationship of financial year to the working season;
d. impact on businesses;
e. taxation systems and procedures;
f. statistics and data collection;
g. the convenience of the legislatures for transacting budget
h. other relevant matters.
3. In case a change in the financial year is recommended, the
Committee may also work out the modalities for effecting the
change. This would inter-alia include:
1. appropriate timing of change;
2. the determination of a transitional period;
3. the change in tax laws during the transitional period;
4. the amendments that may be required in various statutes;
5. changes in the coverage of the recommendations of the Finance
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