Why financial year starts from 1st april in India?

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In India, financial year starts on April 1 and ends on the March 31. Do you know why the financial year is taken from April to March? Although the exact reason for why the Financial Year starts from April 1 and ends on March 31 is unknown, the financial researchers have given a few main reasons as listed below.

1. Inheritance from British rule

India was under British control for around 150 years, who followed the accounting period of April to March. After the East India Company started to rule, they applied the same concept in India. Hence, financial year is from April to March in India also. After Independence, the Indian Govt didn’t change this pattern. Thus, in a similar manner, we celebrate the ‘New Year EVE’ on the last day of the year as per the Western Culture.

2. Regional new year

April 1 coincided with the ‘Hindu festival’ of Vaisakha or the Hindu New Year. Hence, this may be the reason why the government also thought of starting the financial from April to March in India.

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3. Agricultural country

India is an agricultural country and most of the sources of income depend primarily on crops. The income relies upon the estimation of the yields that are harvested in the period of February and March. Thus, two months of span give government idea whether the revenue is going to increase/decrease. Hence it is one of the main reasons why the financial year is taken from April to March.

4. Festivals

The main festivals in India like Navratri and Diwali fall in the month of October and November, followed by Christmas in December. During these time periods, the value of sales for the retailers and value buying’s for the shoppers are heavy, which makes accounting time consuming. Thus, to avoid the clash, March was preferred as the month of closure of the financial year and not December.

Thus, the financial year in India begins from the period of April and March 31 is the closing of the financial year.

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Other countries having financial year from April to March

India is not the only country that follows this trend of April to March. Let’s have a look at the countries having financial year from April to March

  • Canada
  • United Kingdom (UK)
  • New Zealand
  • Hong Kong
  • Japan
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