Reasons Why The Indian Financial Year Starts In April

While filing your income tax returns, analysing balance sheets, or just taking stock of your investments at the end of the year, you may have wondered why India's financial year starts in April, unlike January in the USA and most other Western nations.

Well, here are a few reasons for the April-March fiscal year in India.

The April-March period coincides with the Hindu New Year, a major reason for the Indian financial year starting in April.

An interesting fact to know here is that the Hindu New Year is based on the lunar calendar. It is celebrated accordingly in different parts of the country. It usually falls in March or April, coinciding with the financial year for India.

India follows the British calendar year based on the Gregorian calendar. Here's an intriguing backstory:

Initially, the British government used the Gregorian calendar but had the New Year start on March 25, known as Lady Day. The financial year ran from March 25 to December 31. In 1752, the British shifted the New Year to January 1. Accountants opposed this change, arguing it was unfair, so the financial year continued from April 1.

Financial Year

The April-March financial year aligns with India’s agricultural harvest cycle, reflecting the close connection between agriculture and the economy. This timing integrates with the monsoon season, which is crucial for crop growth.

Monsoon Impact

From June to September, the monsoon season provides essential rainfall, initiating crop sowing in June and July. Harvesting typically occurs between October and March, overlapping with the financial year’s end and start.

Government Planning

Aligning the financial year with the crop season allows effective government planning and resource allocation. It enables timely announcements of policies, fund distribution for subsidies, and food grain procurement based on crop estimates.

Farmer Benefits

This alignment supports farmers and agriculture businesses by synchronising financial decisions with expected crop outputs. It aids in planning investments and expenditures, reflecting the economic significance of agriculture.

Sector Implications

The overlap between the crop season and financial year impacts agricultural policies and practices, influencing the broader economy and facilitating strategic planning in the agriculture sector.

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​​​​​​​* The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your circumstances. You are recommended to obtain specific professional advice before you take any/refrain from any action. Investments are subject to changes in tax laws. Please get in touch with a professional consultant for an exact calculation of your liabilities.